Finance minister Arun Jaitley in Union Budget for 2016-17 (April-March) introduced a new cess on services named Krishi Kalyan Cess at the rate of 0.5 per cent, the same rate as that for existing Swachh Bharat Cess. The effective rate of the Krishi Kalyan Cess, however, will be lower than 0.5 per cent as the government will provide input tax credit for the cess, as against no input tax credit for Swachh Bharat Cess.
Though the rate being charged for both the cesses is same at 0.5 per cent, the estimates for collections, however, differ for the next financial year. The government estimates to raise Rs 10,000 crore from Swachh Bharat Cess, while Rs 5,000 crore are estimated to be collected from Krishi Kalyan Cess due to the difference in the method of computation of both the cesses.
“We are giving (input tax) credit in Krishi Kalyan Cess, while there is no credit for Swachh Bharat Cess. At every stage of service, there will be a separate cess charged. They would have already paid service tax on some input, for which credit will be given. But no credit is given for Swachh Bharat Cess,” Revenue Secretary Hasmukh Adhia said. Producers can avail this credit on inputs and pay the cess only on the value addition at the time of sale of the product.
Jaitley in his Budget speech for 2016-17 announced levy of Krishi Kalyan Cess from June 1, 2016. The cess is aimed at financing initiatives relating to agriculture and welfare of farmers. The government will also continue to charge Swachh Bharat Cess at the rate of 0.5 per cent on all taxable services, increasing the total rate of service tax to 15 per cent from 14.5 per cent at present.
In the current financial year, the government aims to collect Rs 3,750 crore from Swachh Bharat Cess that the government levied at the rate of 0.5 per cent on the value of taxable services with effect from 15 November 2015.