FAQ on SBC-GSC Intime Services Pvt. Ltd.-14.11.15-Update

Frequently Asked Questions on Swachh Bharat
Cess (SBC) @ 0.5% w.e.f. 15th
November, 2015
right advice at right time…
2/19 Nityanand Nagar, Sahar Road, Andheri (East), Mumbai-400 069.
14.11.2015

FAQs on Swachh Bharat Cess
Right advice at right time....
Address: 2/22, Nityapriya, Nityanand Nagar, Sahar Road, Andheri (East), Mumbai – 400 069.
Tel: +91 22 2683 6519; Email: info@gscintime.com Page 2 of 12
On the Budget date, Finance Minister, Mr. Arun Jaitley, had announced a new levy called
‘Swachh Bharat Cess’ (SBC) only on services if need arises for financing and promoting
initiatives towards ‘Swachh Bharat’. The provisions were introduced in Finance Act, 20151
but the levy was not introduced till date.
Effective from 15th
November, 20152
, SBC is leviable on value of all taxable services @
0.50%3
. As per provisions of Finance Act 2015, the present rate of 0.50% may be increased
to 2% by the Central Government. Various aspects of this new levy have been discussed
hereunder:
1. Whether SBC is leviable on specified services only?
SBC is leviable on all taxable services except Services listed under Section 66D of the Finance
Act, 1994 (i.e. negative list of services) and services exempted by way of various Exemption
1
Chapter VI of Finance Act, 2015
2
Notification No. 21/2015-ST dated 6th
November, 2015
3
November, 2015
Swachh Bharat cess (SBC) introduced @ 0.5% on value of all taxable services from
15th
November, 2015

Notifications. Further, the assessee has to discharge SBC on services covered under Reverse
Charge Mechanism as well4
.
2. How to calculate SBC, is it on the amount of tax or value of services?
Unlike EC and SHEC, SBC would be chargeable on value of services and not on tax element.
Therefore, the effective rate of Service tax would be 14.50% (14%+0.50%).
3. In case of certain services, the valuation Rules5
provides for certain presumptive
values. How to calculate SBC in such cases?
It is clarified that SBC shall be applicable on taxable value of services as determined vide
Valuation Rules6
. Therefore, following would be the effective rate of Service tax on such
services:
Nature of Service Taxable
value (%)
Effective
Service Tax
Rate
SBC Effective
Rate (incl.
SBC)
Works Contract for Original works 40 5.60% 0.20% 5.80%
4
November, 2015
5
Service tax (Determination of Value) Rules, 2006
6
November, 2015

value (%)
Effective
Service Tax
Rate
SBC Effective
Rate (incl.
SBC)
Other Works Contracts 70 9.80% 0.35% 10.15%
Money Changing Value
prescribed7
14% 0.5% 14.50%
Restaurant 40 5.60% 0.20% 5.80%
Outdoor Catering 60 8.40% 0.30% 8.70%
4. Certain services are exempted partially (abatement8
). How to discharge SBC on such
partially exempt services?
It is notified that the assessee shall levy SBC on abated value9
. Therefore, following would
be the effective rate of Service tax on such services:
7
Rule 2B of Service tax (Determination of Value) Rules, 2006
8
Notification No. 26/2012–ST dated 20th
June, 2012
9
November, 2015

Portion
(%)
Service Tax SBC Effective
Rate (incl.
SBC)
Financial Leasing including hire
purchase
10 1.40% 0.05% 1.45%
Transport of Goods by Rail 30 4.20% 0.15% 4.35%
Transport of Passenger by Rail 30 4.20% 0.15% 4.35%
Mandap Keeper 70 9.80% 0.35% 10.15%
Transport of passengers by Air –
Economy
40 5.60% 0.20% 5.80%
Transport of passengers by Air –
Other than Economy
60 8.40% 0.30% 8.70%
Renting of hotels, guest houses etc. 60 8.40% 0.30% 8.70%
Goods Transport Agency 30 4.20% 0.15% 4.35%
Renting of motor cab 40 5.60% 0.20% 5.80%
Transport of passengers by contract
carriage/ radio taxi
40 5.60% 0.20% 5.80%
Transport of goods in a vessel 30 4.20% 0.15% 4.35%

Portion
(%)
Service Tax SBC Effective
Rate (incl.
SBC)
Tour Operator’s services – Package
Tour
25 3.50% 0.125% 3.625%
Tour Operator’s services – Only
arranging or booking accommodation
in relation to tour
10 1.40% 0.05% 1.45%
Tour Operator’s services – Other than
above
40 5.60% 0.20% 5.80%
Construction of Complex – (In cases
where the Unit is residential, the
Carpet area is upto 2000 sq. feet and
the value is less than Rs. 1 Crore)
25 3.50% 0.125% 3.625%
Construction of Complex – Others 30 4.20% 0.15% 4.35%
5. How to discharge SBC in case of services liable to presumptive rates of taxation?
In respect of following specified services, optional presumptive rate of Service tax has been
prescribed10
:
10
Rules 6 (7), (7A), (7B) and (7C) of Service tax Rules, 1994

 Air travel agent
 Insurer carrying on life insurance business
 Purchase or sale of foreign currency including money changing
 Distributor or selling agent in relation to lottery
Now, for such specified services, optional presumptive rate for discharge of SBC is also
introduced11
which has to be calculated vide following formula:
Service tax Liability * 0.5
14
6. In case of prospective charge, whether services provided by assessee before 15th
November, 2015 would attract levy of SBC?
A table summarising the effective rate of tax applicable to assessee in various situations has
been pasted hereunder for ready reference12
:
Situation Payment received Invoice raised SBC
leviable?
Invoice issued and payment
received prior to 15.11.2015
Prior to 15.11. 2015 Prior to 15.11.2015 No
Payment received before Prior to 15.11.2015 Upto 28.11.2015 No
11
November, 2015
12
Rule 5 of Point of Taxation Rules, 2011

Situation Payment received Invoice raised SBC
leviable?
15.11.2015 and invoice
issued within specified time
Prior to 15.11.2015 Post 28.11.2015 Yes
Invoice issued and payment
received post 15.11.2015
(Services provided post
15.11.2015)
Post 15.11.2015 Post 15.11.2015 Yes
However, to avoid any controversy, it is advisable to raise invoice by 14th
November, 2015
itself for the services completed till 14th
November 2015.
7. In case of Reverse Charge Mechanism, if the services are received and invoice is raised
prior to 15th
November, 2015 but payment is made post 15th
November, 2015,
whether the assessee has to discharge SBC as well?
Vide POTR, Service tax liability crystalises on the date of payment for all the cases covered
under Reverse Charge Mechanism13
. Therefore, SBC will be applicable on all payments made
post 15th
November, 2015, by the service recipient in respect of cases covered under
Reverse Charge Mechanism.
13
Rule 7 of POTR

8. Whether assessee may collect SBC from service receiver? If yes, whether the same
needs to be shown separately on the invoice?
Since SBC is levied and collected as Service tax, assessee may collect the same from service
receiver. Further, assessee shall show SBC separately on the invoice.
9. Whether assessee has to create separate ledger in the accounting/ERP system for
SBC?
Since this is a separate Cess, assessee would have to open new ledgers with respect to SBC
in Books of Accounts.
10. How to make payment of SBC in Government Treasury?
As of now, there is no accounting code allocated to SBC to make payment to Government
Treasury. As per FAQs released by CBEC, the accounting code would be notified shortly in
consultation with the Principal Chief Controller of Accounts.
11. What would be the consequence of delayed payment of SBC?
Delayed payment of SBC would attract interest as applicable to Service tax14
.
14
Section 119 (5) of the Finance Act, 2015

12. What would be the consequence of non-payment of SBC?
Provisions relating to penalty, prosecution, recovery etc. may be squarely applicable in case
of non-payment of SBC.
13. Whether assessee can take CENVAT Credit of SBC?
Section 119 (2) of Finance Act, 2015 contains wordings as, ‘there shall be levied ...a cess to
be called as ‘Swachha Bharat Cess’ as service tax on all or any of taxable service...’.
Therefore, analysed from this angle, it appears that SBC is nothing but a part of Service tax,
though collected additionally and separately for specific purpose. Therefore, it appears that
CENVAT credit of SBC may be available. However, in view of absence of express provisions
on credit availability or suitable amendments in CENVAT Credit Rules, 2004 till date, credit
availability or otherwise is still a question.
However, it would be worth noting that as per FAQs published by CBEC on its website, it has
been stated that credit of SBC cannot be availed and SBC cannot be paid by utilizing CENVAT
Credit.

Disclaimer
This document is not a written opinion. This document is meant for internal circulation for
introduction/basic understanding purposes only. A detailed consultation with us is required
before taking any tax/business decision based on this document. GSC, its employees or
directors are in no way responsible for any loss arising due to reliance placed on this
document.

Right advice at right time…
2/19 Nityanand Nagar, Sahar Road, Andheri (East), Mumbai-400 069.
+91 22 268 365 19
info@gscintime.com
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FAQ on SBC-GSC Intime Services Pvt. Ltd.-14.11.15-Update

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