- Introduction
SBC is tax in addition to Service Tax which shall be levied and collected in accordance with the provisions of Chapter VI of the Finance Act, 2015,called “Swachh Bharat Cess”.
SBC has been imposed for the purposes of financing and promoting Swachh Bharat initiatives by government.
- Applicable Rate
SBC is additional levy of 0.50% on all the taxable service with effect from 15th November 2015. SBC would be calculated in the same way as Service tax is calculated.
- Treatment
Swachh Bharat Cess will be levied only on taxable services. This means SBC will not be imposed on exempted services and non -taxable service in Negative list.
- Separate Disclosure
SBC needs to be charged separately on the invoice, accounted for separately in the books of account. SBC may be charged separately after service tax as a different line item in invoice. It can be accounted and treated similarly to Education cesses.
- Journal Entry
|
1
|
Under Normal service tax treatment
India Motors……………………. Dr To, Sales – Service To, Service Tax To, SBC (Being - sale of service to India Motors) |
1,00,000 |
18,825 14,000 500 |
|
2
|
Under Reverse charge mechanism
Transportation Charges………Dr To, Bank a/c To, Service Tax* To, SBC** (Being - Transportation charges paid) |
50,000 |
47,825 2,100 75 |
|
3
|
Payment
Service Tax…………………………Dr SBC…………………………………….Dr To, Bank a/c (Being - Service tax paid) |
16,100 575 |
16,675 |
| Note: |
*Under reverse charge mechanism for
Goods transport agencies, service tax will be
|
|
charged for service recever at the
rate of 0.042%(i.e.,14%x30%)
|
|
|
|
**For SBC the rate under Reverse charge
mechanism, SBC rate will be 0.0015%(i.e.,0.50%x30%)
|
- Credit of SBC cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax.
- Point Of Taxation
Date of Completion of Service
|
Date of issue of invoice
|
Date of receipt of payment
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Effective rate
|
Before 15/11/2015
|
After 15/11/2015
|
After 15/11/2015
|
14.50%
|
Before 15/11/2015
|
Before 15/11/2015
|
After 15/11/2015
|
14%
|
Before 15/11/2015
|
After 15/11/2015
|
Before 15/11/2015
|
14%
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After 15/11/2015
|
Before 15/11/2015
|
After 15/11/2015
|
14.50%
|
After 15/11/2015
|
Before 15/11/2015
|
Before 15/11/2015
|
14%
|
After 15/11/2015
|
After 15/11/2015
|
Before 15/11/2015
|
14.50%
|
- Computation under reverse charge mechanism
As per Finance Act, 2015, the provisions of Chapter V of the Finance Act, 1994, and the rules made there under are applicable to SBC also. I.e., the reverse charge under the Finance Act, 1994, is made applicable to SBC.
- Computation in case of Abatement
Taxable services, on which service tax is levied on a certain percentage of value of taxable service, will attract SBC on the same percentage of value as applicable for service tax.
For example, in the case of GTA, computation would be (14% Service Tax + 0.5% SBC) X 30% = 4.35% (4.20%+0.15%)
- Conclusion
Although SBC is referred to as Cess, it is levied on value of taxable service not on Service tax amount. By this the effective rate of Service tax rate will be 14.5%, which is increased from earlier rate 14%
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