Rate of service tax further increased with levy of Swachh Bharat Cess from 15-Nov

Budget 2015 had provided for a new levy viz. Swachh Bharat Cess (SBC) on all taxable services effective from the date to be notified at a rate not exceeding 2%.

Now, CBEC vide Notification No. 21/2015-ST dated 6-Nov-2015 has provided that SBC would be leviable @ 0.5% on value of all taxable services with effect from 15-Nov-2015. This implies that effective rate of service tax will be 14.5%.

It is further notified that SBC would not be applicable on non-taxable services and services which are exempt from service tax.

Consequently, the effective rate of service tax will also change proportionately for such taxable services on which special rates apply, or for which abatement is available, and where tax is payable on partial reverse charge mechanism.

However, there is no consequent amendment proposed in the CENVAT Credit Rules, 2004.  Hence, whether CENVAT credit of SBC would be available or not, and whether balance of Tax or Education Cesses can be utilised for payment of SBC or not, requires an immediate clarification / amendment from the Board.