Krishi Kalyan cess of 0.5 pc from Wednesday

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SME Times News Bureau | 31 May, 2016
The Krishi Kalyan Cess of 0.5 percent on services imposed by Finance Minister Arun Jaitley comes into force from Wednesday through which the government proposes to collect Rs 5,000 crore during the remaining 10 months of the current fiscal.

The total service tax collection target has been pegged at Rs 216,000 crore during the current fiscal. In addition, the government intends to collect Rs 10,000 crore from the 0.5 per cent Swachh Bharat Cess and Rs 5,000 crore from Krishi Kalyan Cess.

"I propose to impose a cess called Krishi Kalyan Cess at 0.5 per cent on all taxable services, the proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers," Jaitley had said in his budget speech.

"The cess will come into force with effect from June 1, 2016."

The overall rate, including cess, which will be at 15 per cent, will affect a host of services -- telephones, restaurants, cinemas, visits to beauty parlours, air travel, insurance, DTH, credit and debit cards, courier, healthcare, banking and professional consultancies.

Earlier, there were two other cess under the service tax net -- education cess and secondary and higher education cess. These were rationalised and subsumed into the overall service tax rate of 14 per cent.

Though the Krishi Kalyan cess is only 50 paise per Rs 100 of transaction, on a larger scale the proceeds could fetch more than Rs 5,000 crore, finance ministry officials said.

The officials said the increase in the service tax rate is part of the effort to bring it on par with the expected rate of goods and services tax (GST) of 17-18 per cent.

In the 2015-16 budget, Jaitley had raised the service tax rate from 12.36 to 14 per cent. From November 15, 2015, an additional 0.5 per cent Swachh Bharat cess had also come into force.