The Union Budget, 2015-16, proposed for levy of a Swachh Bharat Cess on all or any of the services, for the purposes of financing and promoting Swachh Bharat Mission or for any other purpose relating thereto. The rate proposed in the Budget was up to 2 percent on all or certain services, if need arises. Now the levy of Swachh Bharat Cess has been finalized at 0.5 percent on all taxable services to sponsor the Swachh Bharat Abhiyan initiated in the recent times. This has brought rate of Service Tax to 14.5 percent with effect from 15.11.2015.An explanation given by the Finance Ministry was presented as Swachh Bharat Cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat. They also added that the proceeds from collection of this Cess will be exclusively used for Swachh Bharat Mission. To put it in simple terms a consumer will pay 50 paisa more on every one hundred rupees of taxable services availed. But as we know drop by drop makes an ocean, so every penny will make a difference. As estimated 0.5% will result into expected revenue of some thousand crores for the Government.

To ensure higher hygiene standards across the nation cleanliness is on the top priorities of the Government. India has a population of over 120 crore. Therefore, for such a big and populous nation our Government has got its reasonable share of cleanliness concerns. In fact, population as well as entrusted authorities with the job of keeping our country clean face a constant struggle. Cleanliness has huge impact on public health and longevity. Dirty surroundings are the major reason behind sufferings and death from diseases, like, malaria, dengue, diarrhea, jaundice, cholera etc., and is closely associated high public health expenditure. Swachh Bharat Abhiyan with its focus on increased allocation and efficient usage of funds will help prevention of many of these diseases with consequential benefit to everyone.

Although the initiative is heartily welcome but it has few feebleness, which is very needed to be taken care of. The levy has been targeted on all the taxable services, which will make availing services more expensive from now on. It has been levied on and from 15.11.2015, which was an abrupt start as it falls in the middle of the month. Sudden levy and imposition has resulted in certain disturbances and complexities in functioning of businesses with change of rate from mid of the month. This affected them with certain issues like value of invoices, point of taxation, payment of tax under reverse charge mechanism, value of abatement etc. No amendment was made in the Cenvat Credit Rules, 2004 regarding utilization of Swachh Bharat Cess so far. In the absence of the express provisions, credit would not be admissible to assesses and will form part of the cost. This is a discouraging stratagem as we are heading toward GST regime where it is expected of no cascading effect of taxes and grant of full credit. We hope for suitable amendment to Cenvat Credit Rules, 2004 to to be brought in order to provide for utilisation of SBC. In line with Cenvat not admissible for Swachh Bharat Cess, Board has clarified to charge 14% and 0.5% separately and also to disclose the same on invoice.

Contributed by Ruhi Jhota Ruhi is a lawyer and practicing in Indirect Taxes. She possesses strong research background which is required to present the complexity of taxation in terms that a layman can understand.

Contact for queries: ruhijhota@gmail.com