krishi kalyan cess

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  1. mahendra tiwari

    mahendra tiwari New Member

    Hi,

    As Kirshi kalyan cess if applicable for the invoices raised before 01-06-2016 and payment not received till 01-06-2016...
    query :- what impact on my outstanding since last 12 month, is it attract ??
     
  2. ZED

    ZED Well-Known Member

    As per S.158 (2) of the Finance Act 2016
    "There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Krishi Kalyan Cess, as service tax on all or any of the taxable services at the rate of 0.5 per cent...."

    As per S.67A of the Finance Act 1994
    " The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided."


    This is the correct position. But however, we also have Point of taxation rules which have not been amended to include the effect of insertion of S.67A. It is a trite law that if there is any contradiction among the rules and the Act, then the Act shall prevail over the rules.
    Consequently, rate has to be determined as per S.67A and rules shall apply, to the extent they are not inconsistent with the S.67A


    But we also have Point of Taxation Rules
    Now, what does the rules says?

    Again there is confusion as to which rule shall be applicable.
    Whether it would be Rule 4, which is applicable when there is change in effective rate of tax or Rule 5 would be applicable, which is applicable when the service is taxed for the first time.

    Though , it may seem that Rule 4 is applicable because effectively, whats the assessee is paying is 15%, which includes the Krishi Kalyan Cess, but infact it is a new levy and hence Rule 4 is to be applied.

    Why a new levy?
    Kindly read S.158(2) of the Finance Act 2016
    "There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Krishi Kalyan Cess, as service tax on all or any of the taxable services at the rate of 0.5 per cent...."

    Prior to the enactment, there was no such LEVY of such cess.
    Krishi Kalyan Cess has been levied for the first time and it shall be treated as service tax (it is not a service tax)

    Before we had Krishi Kalyan Cess , we had Swach Bharat Cess.
    The language used there was virtually the same
    S.117(2) of the Finance Act 2016 stated that "there shall be levied and collected......."
    Kindly read the full text in the image below.
    upload_2016-5-25_18-23-46.png

    To this, what was the response of the Government?
    FAQ released by the CBEC
    upload_2016-5-25_18-19-28.png


    Similarly here also, it is a case of new levy and hence rule 5 of Point of Taxation Rules is applicable , according to which

    Where a service is taxed for the first time, then,-

    (a)no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable;

    (b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within fourteen days of the date when the service is taxed for the first time.
     
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