Since the last few weeks, Swachh Bharat Cess (SBC) has been the subject of many a heated debate and discussion. While the proponents of SBC argue that, there would be a separate fund now, which can be utilized exclusively for the Swachh Bharat activities, the opponents think otherwise. They are worried that this cess provides for no credit, and will also require major changes in the billing system. However, before we jump into the bandwagon of argument and taking sides, let us understand SBC and how it impacts a common consumer.
What is Swachh Bharat Cess?
The Finance Act 2015, under section 119 Act has empowered the Government of India to levy and collect Swachh Bharat Cess on any taxable service at a rate, not exceeding 2% of the taxable service. The amount collected under this head is to be utilized for the activities flagshipped under the Swachh Bharat initiative.
On November 15, 2015, the Government of India made an announcement that it has imposed Swachh Bharat Cess at the rate of 0.5% of the taxable service. This means that now the new service tax would be 14.5%. Most of the people are under the mistaken impression that SBC is levied on service tax, but this is not correct. It is levied on the entire taxable amount of the service. It is charged under a separate head in invoices.
The Impact of Swachh Bharat Cess
It is important to understand that any service, for which you had been paying the service tax is subject to SBC. This means that your restaurant bill , beauty parlour/spa bill, any outdoor catering services that you may avail, services of travel agents and insurance agents and any other taxable service, which is not included in the negative list of services is subject to SBC. Let us understand this in a little more detail with the example given below.
Suppose you go to a restaurant and your bill comes to INR 1300. In this case, your service tax would be 14% of 40% which would come to INR 72.8. Similarly, your SBC would be INR 2.6, calculated as 0.5% of 40% of INR 1300. The total service tax, in this case would be INRINR 75.4.
The Negative List and SBC
While understanding the impact of Swachh Bharat Cess, one cannot negate the importance of negative list. The services which are not subject to service tax are called negative list of services. Due to their exclusion from taxable services, naturally SBC is not levied upon them. These include most of the Government services, services by RBI, services relating to agriculture, educational services etc. Refer to this list, which gives the complete negative list of services under 17 heads.
This means that although you will have to shell out more for eating out, travel, insurance, exchange of foreign currency, your child’s education and most of the government/agricultural/banking will largely remain unaffected.
The Final Word
What remains to be seen is, will SBC deliver its promise? Will 2016 herald more hygienic conditions for our country? Would there be lesser diseases? The Government of India hopes to raise 10,000 crore from the levy of Swachh Bharat Cess. If the common consumer finds that he/she is living in much better conditions, perhaps SBC wouldn’t seem as burdensome. For now, you just continue to shell out some extra service tax towards SBC.
Sridevi Datta is a Cost Accountant. After working as a Business-SME in a leading E-learning centre, she now blogs regularly at The Write Journey.