Swachh Bharat Tax: Eating out, phone calls get costlier as service tax hiked to 14.5%

New Delhi(PTI): Eating out, telephony and travel will become expensive from Sunday with the Government imposing 0.5% Swachh Bharat cess on taxable services which is expected to yield about Rs 3,800 crore to the exchequer in the remaining months of the fiscal.

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With the imposition of the cess, service tax rate will go up from 14% to 14.5% on all taxable services.

According to Revenue Secretary Hasmukh Adhia, the Government expects to collect around Rs 10,000 crore from Swachh Barat cess for full year.

So in the remaining months of this fiscal till March 31, 2016, the cess would yield about Rs 3,800 crore to the kitty.

The Swachh Bharat cess would be levied only on the portion of taxable services (after abatement) and will go towards funding of the cleanliness drive, a pet project of Prime Minister Narendra Modi.

This means that service tax on restaurant bills will go up from 5.6% to 5.8% following the levy of 0.5% Swachh Bharat cess.

The Finance Ministry has also clarified that the Swachh Bharat cess will not apply on those services for which payments have been received prior to November 15 and invoices raised before November 29.
The decision to impose 0.5% cess will translate into a tax of 50 paise only on every Rs 100 worth of taxable services.

Explaining the provisions for the levy of cess, the Ministry said it would be calculated on the abated value or value arrived as per the Service Tax (Determination of Value) Rules, 2006.

For restaurants or eating joints having air conditioning facility, the cess would be 0.5% of 40% of the billed amount i.e 0.2%. “The cumulative service tax and Swachh Bharat Cess liability would be 5.8% (14.5% of 40%) of the total amount charged,” it said

Finance Minister Arun Jaitley had in Budget 2015-16 proposed to levy a Swachh Bharat cess of up to 2% “on all or certain services, if need arises”.

“Swachh Bharat cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives,” the Finance Ministry had said while notifying the Swachh Bharat cess.

The government had in Budget 2015-16 estimated to collect over Rs 2.09 lakh crore from service tax. The Rs 3,800 crore collection from the cess would be over and above that.

With PTI