1. --------- BY CA KR RAMANKUTTY FCA KOCHI
PRESENTATION ON KRISHI KALYAN CESS & SERVICE RENDERED BY GOVERNMENT AND LOCAL AUTHORITIES BY
CA KR RAMANKUTTY FCA
KOCHI

2. THE BUDGET SPEECH 2016
“152. I propose to impose a Cess, called the Krishi Kalyan 0.5% on all taxable services, proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. The Cess will come into force with effect from 1st June Input Tax credit of this cess will be available for payment of this cess”-- FM introducing the finance bill 2016.
THE TAXATION ASPECTS OF KKC.

3. CESS MEANS A SPECIAL LEVY FOR A SPECIAL PURPOSE.
KRISHI KALYAN CESS (KKC) HAS BEEN INTRODUCED FOR RAISING RESOURCE FOR FINANCING AND PROMOTING INITIATIVES TO IMPROVE AGRICULTURE OR ANY OTHER POUPOSE RELATING THERETO.
IT IS A CESS TO BE CALLED KKC AS SERVICE TAX
BUT THE LEVY IS INDEPENT . FINANCE ACT CHAPTER –VI- DEALS WITH KKC .
NOTIFIED EFFECTIVE

4. KKC -LEVIABLE ON ALL OR ANY OF THE TAXABLE SERVICES @0
KKC -LEVIABLE ON ALL OR ANY OF THE TAXABLE OF THE VALUE AND NOT ON THE SERVICE TAX .
KKC- SUBJECT TO NON-TAXABILITY IN NEGATIVE LIST AND MEGA EXEMPTION NOTIFICATION 25/2012 DATED AS AMENDED .
KKC - ON ABATED VALUE OF TAXABLE SERVICE .
KKC- APPLICABLE TO REVERSE CHARGE AND JOINT CHARGE .
SERVICE TAX NOTIFICATIONS , 35 ,28 CE(NT) AND CIRCULAR 194/04/2016 ISSUED .

5. EFFECTIVE DATE
WHAT DOES IT MEAN ? WHETHER KKC IS ATTRACTED ON SERVICE RENDERED ON OR AFTER ONLY OR ON SERVICE RENDERED PRIOR TO ALSO ?.
THE DATE TO BE DETERMINED BY APPLYING THE POINT OF TAXATION RULE 2011 (POTR)
RULE 5 - NO KKC IS ATTRACTED IF SERVICE RENDERED ON OR BEFORE AND INVOICE RAISED AND PAYMENT RECEIVED BEFORE – TWIN CONDITIONS
OR – SERVICE RENDERED PRIOR TO AND INVOICE RAISED WITHIN 14 DAYS EVEN IF PAYMENT RECEIVED LATER .

6. NOTIFICATION 35/ST -2016 HAS BEEN ISSUED ON 23. 06
NOTIFICATION 35/ST HAS BEEN ISSUED ON EXEMPTING SERVICE FROM KKC - IF SERVICE WAS RENDERED AND INVOICE WAS ISSUED ON OR BEFORE
THE RECEIPT CONDITION IN RULE 5 OF POTR IS DONE AWAY WITH.
WHAT HAPPENS FOR SERVICE RENDERED ON OR BEFORE BUT INVOICE ISSUED AFTER ?
PAYMENT RECEIVED BEFORE , SERVICE RENDERED PRIOR TO BUT INVOICE RAISED AFTER 14TH JUNE ?
KKC IS ATTRACTED IN BOTH THE CASES.

7. POTR APPLIED TO KKC S.No. Date of applicability of KKC Date of Invoice
Date of payment received
Applicability of KKC 1.
1st June, 2016
14th June, 2016
30th May, 2016
No -[POTR-R-5-b] 2
18th June, 2016
Yes -[POTR-R-5-b] 3
No - [POTR-R-5] 4
3rd June, 2016
Yes-[POTR-R-5] 5
No - [Notification]
35/2016dated

8. ie.SERVICE RENDERED BEFORE THE INTRODUCTION OF KKC BECOMES TAXABLE APPLYING POTR-LEGALLY NOT CORRECT.
POTR-RULE 5 IS IN CLASH WITH SECTION 67A , 65B(51) and 66B. RATE OF SERVICE TAX PREVAILING AT THE TIME WHEN THE TAXABLE SERVICE IS RENDERED IS TO BE TAKEN. NO KKC INFORCE WHEN SERVICE RENDERD. In Association of Leasing and Financial Service Companies v. UOI.2010 (20)STR 417.SC it was held that taxable event is rendition of service . Also against Vazir Sultan Tobacco (SC) 83 ELT3
POTR NOT TO APPLY IN THE CASE OF INVIVIDUALS AND PARTNERSHIP FIRMS WHERE AGGREGATE VALUE OF SERVICES PROVIDED DOES NOT EXCEED RS.50,00,000 .

9. INVOICING – KKC TO BE SEPARATELY SHOWN IN THE INVOICE. particulars Rs
TO BE REMITTED UNDER SEPARATE ACCOUNTING CODE
particulars Rs
Value of taxable service
5,000.00
Add: Service 14%
700.00
Add: SB 0.5%^ .
25.00
Add: 0.5%^
Total amount
5,750.00
Tax Collection
Other-Reciepts (Interest)
Deduct Refunds
Penalties

10. VALUATION OF SERVICES FOR KKC-AS PER VALUATION RULE SUBJECT TO ABATEMENT REVERSE CHARGE AND JOINT CHARGE.
REVERSE CHARGE– POTR–GENERALLY THE PAYMENT DATE.BUT IN THE CASE OF CHANGE IN THE LIABILITY–KKC INTRODUCTION- IT IS THE INCOICE DATE. [AMENDMENT VIDE NF21/2016 DATED ].
KKC AND CENVAT CREDIT .
SERVICE PROVIDER CAN AVAIL – USE ONLY FOR KKC PAYMENT
MANUFACTUER – NO – AN ADDITIONAL CREDIT
MANUFACTUER WHO IS A SERVICE PROVIDER – YES FOR PAYMENT OF OUTPUT SERVICE TAX LIABILITY

11. RELIEF TO EXPORT /SEZ
REBATE OF KKC PAID ON INPUT SERVICES USED FOR PROVISION OF EXPORT SERVICE [NOTIFICATION-29/2016-ST DATED ]
VIDE NOTIFICATION 29/2016-ST DATED NOTIFICATION 39/2012 DATED HAS BEEN AMENDED TO INCLUDE KRISHI KALYAN CESS MAKING IT ELIGIBLE FOR REBATE IN CASE OF PROVISION OF EXPORT OF SERVICE.
REFUND OF KKC PAID ON SERVICES USED IN SEZ [NOTIFICATION-30/2016-ST DATED ]
SEZ/DEVELOPER CAN CLAIM REFUND OF KKC IN RESPECT OF SERVICES UTILIZED WITH IN SEZ.
ALTERNATE RATE OF SERVICE TAX INCLUDING KKC UNDER RULE 6 SUB RULE 7, 7A, 7B, 7C OF SERVICE TAX RULES, 1994 [NOTIFICATION-31/2016-ST DATED ]
NOTIFICATION 31/2016 HAS AMENDED THE ABOVE SUB-RULE 7, 7A, 7B, 7C OF SERVICE TAX RULES, 1994 TO PRESCRIBE RATES INCLUSIVE OF SERVICE TAX.

12. SERVICE RENDERED BY GOVERNMENT
AND
LOCAL AUTHORITY
EFFECTIVE DATE
ANY SERVICE RENDERED BY THE GOVERNMENT OR LOCAL AUTHORITY TO A BUSINESS ENTITY -RCM ATTRACTED
PRIOR TO SERVICE RENDERED BY GOVT/LA AS “SUPPORT SERVICE” WAS TAXED UNDER RCM.THIS IS DISCONTINUED
“GOVERNMENT” HAS BEEN DEFINED TO MEAN DEPARTMENTS OF CENTRAL GOVERNMENT, STATE GOVERNMENT AND ITS DEPARTMENTS , UNION TERRITORY AND ITS DEPARTMENTS.
“LOCAL AUTHORITY” HAS BEEN DEFINED TO MEAN PANCHAYATH, MUNICIPALITY ETC. IN ORDER TO EXCLUDE CERTAIN SERVICES FROM THE SCOPE OF THE SAID SERVICE,

13. EXEMPTED SERVICES
Where the gross amount does not exceed Rs.5000/-
Services provided by Government or local authority to another Government or local authority.
Services by way of issuance of passport, VISA, driving license, birth certificate or death certificate.
Fines or liquidated damages payable to Government or local authority .
Registration fee under any law for the time being in force.
Testing , calibration , safety check or certification relating to protection or safety of workers, consumers or public at large required under any law for the time being in force.
Assignment of right to use natural resources to an individual farmer for the purpose of agriculture.
Assignment of right to use natural resources where such right was transferred prior to This is subject to certain conditions specified in the Notification.
Usage of radio frequency spectrum for the financial year
MOT charges payable to Central Excise Department

14. CBEC No. 192/02/2016-service tax dated 13. 04
CBEC No. 192/02/2016-service tax dated the taxability of services rendered by Government.
Tax, cess, duties, under various statutes, penalty, liquidated damages under various statutes are not consideration for rendering service .
The taxes include excise duty, customs duty, service tax, state VAT, CST, Income-tax, Wealth-tax, Stamp duty, taxes on professions, trades, callings or employment, Octori, entertainment tax, luxury tax and property tax.
Fine and penalty chargeable by government or local authority for violation of a statute, regulations, fines, penalties and liquidated damages for non-performance of contract with government or LA are not liable for service tax.
Services provided in lieu of fee charged by government/local authority- potential area of dispute.
Any activity undertaken by government or LA for a consideration constitutes a service liable for service tax whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not.
Eg: fee charged for service, payment to ROC, other than for registering a company, is liable for RCM provided gross amount charged for the service exceeds Rs.5000/-
 No reverse charge liability on renting of immovable property and certain services specified in sub clause (i) to (iii) of clause (a) of Section 66D of the Finance
Point of taxation in the case of RCM for government service (NF 24/2016/ST/dated amending Rule 7 of POTR).
The POTR is earlier of the date on which payment in respect of such service become due as indicated in the invoice, bill or challan any other document issued by the government or such payment is made

15. (ii)a non-resident having a permanent establishment in India.
EQUALISATION LEVY
CHAPTER VIII OF THE FINANCE ACT
(relevant part extracted)
Charge of equalisation levy.
165 . (1) On and from the date of commencement of this Chapter, there shall be charged an equalisation levy at the rate of six per cent of the amount of consideration for any specified service received or receivable by a person, being a non-resident from—
(i)a person resident in India and carrying on business or profession; or
(ii)a non-resident having a permanent establishment in India.
(2) The equalisation levy under sub-section (1) shall not be charged, where—
(a)the non-resident providing the specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment;
(b)the aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed one lakh rupees; or