Krishi Kalyan Cess (KKC) is a new cess introduced by the government at a rate of 0.5% to be used for improving agriculture. It is applicable from June 1, 2016 in addition to service tax of 14% and Swachh Bharat Cess of 0.5%, taking the total tax rate to 15%. The document discusses the point of taxation rules for KKC for service providers and recipients, availability of CENVAT credit for KKC, and applicability of KKC for abated services and valuation rules. Examples of KKC rates for different services are also provided.

1. Krishi Kalyan Cess – A presentation
By:
Keshav R Garg
(B.Com, CA, CS, ISA(ICAI))
3328, Sector 27 D, Chandigarh
Ph: +91-172-461-3328
Mob: +91-9888-090-008
Mail: mygst.mytax@gmail.com

2. What is Krishi Kalyan Cess (KKC)?
• A Cess is a tax that is collected by the government to be
used for specific purpose.
• The collection from levy of Cess can be used only for the
purpose for which it is collected.
• Krishi Kalyan Cess has been introduced by the government
w.e.f 01.06.2016 for improving agriculture facilities.
(Section 161(2) of Finance Act 2016)
• The effective rate of Service Tax from 1st June 2016 would
be: 14% (Service Tax) + 0.5% (Swachh Bharat Cess) + 0.5%
(Krishi Kalyan Cess) = 15 %.

3. Point of taxation for service providers: KKC
• Rule 5 of Point of Taxation Rules 2011 (POTR) has
been amended to include new services as well as
new levy by the government. (10/2016 dated
01.03.2016)
• Rule 5 (a) provides that when the issuance of invoice
and receipt of payment is made before the date of
taxability then the service shall be non-taxable.
• Rule 5(b) provides that if the payment is received
before date of taxability and invoice is issued within
14 days form the service becoming taxable for the
first time, no service tax to be charged.

4. Analysis of Rule 5 of POTR 2011
S. No. Time of issuance
of invoice as well
as amount of
invoice
Time of receipt
of payment as
well as amount
of payment
received.
Position of Taxability
1. 30-05-2016 for
Rs. 2,00,000
31-05-2016 for
Rs. 2,00,000
Non Taxable as issue of
invoice and receipt of
payment before 01.06.2016
2. 30-05-2016 for
Rs. 2,00,000
31-05-2016 for
Rs 1,50,000
Non Taxable to the extent of
1,50,000. The balance 50,000
would be taxable if received
after 01.06.2016
3. 3-6-2016 for
Rs. 2,00,0000
28-05-2016 for Rs
2,00,0000
Non Taxable as receipt of
payment before 1st June
2016 while invoice is issued
within 14 days from
taxability.

5. Analysis of Rule 5 of POTR 2011
S. No. Time of
issuance of
invoice as well
as amount of
invoice
Time of receipt
of payment as
well as amount
of payment
received.
Position of Taxability
4. 15-06-2016 for
Rs. 4,00,000
24-05-2016 for Rs.
4,00,000
Taxable as essential
requirement of issue of
invoice within 14 days from
date of service is not met.
5. Total consideration
was 4 Lacs. On 28-
05-2016 invoice
was issued for 2.50
lacs and remaining
on 20-06-2016
30-05-2016 for Rs.
4,00,000
Non Taxable to the extent
of 2.50 lacs because part
payment invoice issued
after 14 days from date of
receipt.

6. Point of taxation in reverse charge: KKC
• Rule 7 of Point of Taxation Rules 2011 (POTR) has
been amended by the government. (21/2016 dated
30.03.2016)
• As per new proviso, KKC shall be paid by recipient
where the services and invoice have been provided
before 1st June 2016, No KKC shall be paid,
• If either services or invoice are issued after 1st June
2016, then KKC shall not be charged, the point of
taxation shall be the date of payment.

7. Analysis of Rule 7 of POTR 2011
S.
No.
Date of
Service
Date of
Invoice
Date of
Payment
Applicability
1. 20-05-2016 28-05-2016 05-06-2016 Not Applicable as Invoice and
service before 1st June 2016
2. 20-05-2016 02-06-2016 05-06-2016 Applicable Since Invoice issued
after 1st June 2016 – Date of
payment would be applied.
3. 02-06-2016 20-05-2016 05-06-2016 Applicable Since Services
provided after 1st June 2016 –
Date of payment would be
applied.
4. 04-06-2016 10-06-2016 14-06-2016 Applicable- date of payment
after 1st June 2016

8. Cenvat Credit of KKC
• KKC Cenvat Credit shall be available only on
input services availed by output service provider.
• As per Cenvat Credit (Seventh Amendment)
Rules 2016 only “Output Service providers”
are eligible to claim Cenvat Credit of KKC.
• KKC can be setoff only against KKC outstanding
and no other duty paid on input services.
• No Cenvat shall be allowable to a manufacturer
etc for KKC paid by it on input service.

9. Analysis of Cenvat Credit/Refund:
S. No. Description Recipient Allowed or Not
Allowed
1. KKC charged by Chartered
Accountant service
received by manufacturer
Manufacturer Not Allowed
2. KKC charged by Architect
to a Chartered Accountant
Output Service
Provider
Cenvat Allowed
3. KKC charged by Architect
to SEZ Unit
Exporter Refund applicable
4. KKC charged to exporter of
service
Exporter of
service
Refund (29/2016
dated 26.05.2016)

10. KKC in case of Abated Services &
Valuation Rules
• It has been provided by the government that the
KKC shall be charged by the service provider
only on that percentage of taxable value which is
specified in column (3) i.e. on abated value of
abatement notification no. 26/2012.
• The value of Krishi Kalyan Cess shall be the
value as determined in accordance with Service
Tax (Determination of Value) Rules 2006.

11. Few Illustrative rates for KKC
S. No. Description of
Service
Taxable Value KKC
1. Transport of
passengers by rail.
30% 0.5% X 30% = 0.15%
2. Restaurant Services 40% 0.5% X 40% = 0.2%
3. Works Contract 40% 0.5% X 40% = 0.2%
4. Outdoor catering 60% 0.5% X 60% = 0.3%
5. Financial Leasing
Including Hire
Purchase
10% 0.5% X 10% = 0.05%
6. Packaged Tour
Service
25% 0.5% X 25% = 0.125%

12. By:
Keshav R Garg
(B.Com, CA, CS, ISA(ICAI))
Member of:
Indirect Tax Committee of PHD Chambers
Indirect Tax Committee of CII
Indirect Tax Committee of MyGst.MyTax Foundation
Co-Author – A Handbook on Goods & Service Tax
Author with Service Tax Review by R K Jain
3328, Sector 27 D, Chandigarh
Ph: +91-172-461-3328
Mob: +91-9888-090-008
Mail: mygst.mytax@gmail.com