Krishi kalyan cess & Infrastructure cess With Summary, Finance minister in his budget 2016 speech has announced a cess “krishi kalyan cess” which would make the existing service tax rate 15% from 14.5%. Out of all the expectations from the common man to MNC, salaries employee to startup enthusiast, this budget stands as a one focused on the unorganized sectors of India. Jaitely took uplifting the agriculture sector by reviving the farmers as his main agenda.
Cess is a tax levied and collected within the powers granted by the constitution, for spending on a specific purpose by the name of which it is referred. In his budget 2015 Jaitely has introduced Swachh bharat cess to support and finance the initiatives of “swatch bharat mission” started by the government.
Krishi kalyan cess & Infrastructure cess
Krishi kalyan cess (KKC) – Chapter VI of finance act 1994:
- Krishi kalyan cess will be levied on all or any of the taxable services at 0.5% on the value of taxable services. The specific purpose of introducing this cess is to promote and finance the initiatives to improve agriculture and welfare of farmers or for any other purpose relating thereto.
- Effective from: 1st June 2016 is the date from which krishi kalyan cess becomes effective in force.
- On account of imposing this cess on the value of taxable services it would increase the prices of those taxable services by 0.5% more than their existing prices. Service tax rate become 15% effectively after including swatch bharat cess and KKC.
- Input tax credit: It was also proposed that unlike swatch bharat cess krishi kalyan cess will be available for input tax credit. By this feature one can use the cess paid by him on input services to pay off the liability of kkc on his output services. This facility has not been extended to swatch bharat cess.
- Finance bill 2016 also described that the proceeds of this cess will first be credited to the Consolidated Fund of India. After due appropriation is made by parliament in this behalf central government may use the proceeds for said purpose.
Infrastructure cess (IC) – Chapter VII of Finance act 1994:
- Finance Minister has also proposed a new cess called “Infrastructure cess” to be levied on the value of the vehicles specified in Eleventh Schedule, being goods manufactured or produced. This is cess levied in addition to the existing excise duty.
- Finance bill 2016 stated that “financing the infrastructure projects” is the specific purpose of this cess. It was also said by Jaitely that the proceeds of this would be used for curbing the traffic and pollution which is emerging as a serious problem.
- Rate of infrastructure cess:
|S.no||Description of goods||Rate|
|1||Motor vehicles of length not exceeding 4000 mm, namely petrol, liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven vehicles of engine capacity not exceeding 1200 cc|| |
|2||Motor vehicles of length not exceeding 4000 mm, namely diesel driven vehicles of engine capacity not exceeding 1500 cc.|| |
|3||Other higher engine capacity vehicles such as Sport Utility vehicle (SUVs) and bigger sedans.|| |
- Jaitely has also proposed that Tax to be deducted at source at the rate of 1 % on purchase of luxury cars exceeding value of 10 lakh and purchase of goods and services in cash exceeding 2 lakh rupees.
- Input credit on infrastructure cess would not be available unlike in case of krishi kalyan cess. So the impact of this would be higher than KKC.
Summary Krishi kalyan cesss & Infrastructure cess
|Aspect||Krishi Kalyan Cess||Infrastructure cess|
|Objective||To promote and finance the agriculture activities and farmers welfare||To curb traffic and pollution and to finance infr projeccts|
|Rate||0.5% on taxable value of service||A)small petrol, LPG, CNG cars – 1%|
B)Diesel cars not exceeding 4m in length and engine capacity of up to 1500 cc – 2.5%
C)All other higher engine capacity vehicles SUVs and bigger sedans – 4%
|Input tax credit||Available||Not available|
|Covered in||Chapter – VI of finance act 1994||Chapter – VII|
|Effective from||1st June 2016||1st June 2016|
|Nature||Service tax||Excise duty|
Clean environmental cess:
The existing clean energy cess has been renamed as clean environmental cess. This cess is levied on coal, lignite. The amount of cess applicable has been increased from Rs. 200 per tonne to Rs. 400 per tonne