31 May 2016
Dear Experts,
As we know that rate of service tax going to increase to 15% due to new Levy "Krishi Kalyan Cess"
I want to know that, is Krishi Kalyan Cess payable if service has already been rendered, invoice has also been raised but payments of same have not received yet or will will received on or after 01-06-2016.
I am asking this because yesterday I got a text massage from our Telecom operator "Idea" which was like this "Dear Customer, As per Section 161 of Finance Act 2016 the Service Tax stands revised at 15% (Including levy of Krishi Kalyan Cess at 0.5% w.e.f 1st June'16). This will also apply on any unpaid amount as on 1st June'16. We urge you to pay your dues (if any) on or before 31st May'16 to avoid the additional 0.5% charge which will reflect in your next bill."
Request you all, please help me understanding Point of Taxation rule in this regard and it's effect on Krishi Kalyan Cess
Thank You
31 May 2016
KKC not applicbale in two situation Rule 5 of the POTR covers two specific situations where new levy shall NOTbe payable:
Invoice issued and payment received against such invoice before such service becomes taxable; Payment received before the service becomes taxable and invoice has been issued within 14 days of the date when the service is taxed for the first time - See more at: http://taxguru.in/service-tax/krishi-kalyan-cess-applicability-open-issues.html#sthash.HlNEOs99.dpuf
31 May 2016
Thanks for your comment Sir!
I have gone through the link you have shared with us and concluded that we will have to pay KKC on outstanding amounts.
I would like to see more from our other experts.
thanks again!
02 August 2024
The introduction of the Krishi Kalyan Cess (KKC) and its implications on invoices and payments can indeed be complex. Here’s a detailed explanation based on the Point of Taxation Rules and the applicability of KKC:
### **Background**
The Krishi Kalyan Cess (KKC) of 0.5% was introduced through the Finance Act, 2016, effective from June 1, 2016. This cess is levied over and above the existing Service Tax rates, bringing the total service tax rate to 15% (14% Service Tax + 0.5% KKC + 0.5% Swachh Bharat Cess).
### **Point of Taxation Rules**
The Point of Taxation Rules (POTR) determine the point in time at which the tax liability arises. Under the POTR, the liability for service tax is typically determined based on the following:
1. **Date of Invoice**: If the invoice is issued before the date the new rate comes into effect, the service tax rate applicable at the time of invoicing is generally applied. 2. **Date of Payment**: If the payment is received after the new rate comes into effect and if the service was rendered before the rate change, the revised rate would apply to the payment received.
### **Impact of Krishi Kalyan Cess**
Here’s how the Krishi Kalyan Cess applies based on the scenarios you described:
1. **Service Rendered and Invoice Raised Before June 1, 2016**: - **Rate Applicable**: The service tax rate applicable is the rate effective at the time of the invoice, i.e., before June 1, 2016, which is 14% (plus Swachh Bharat Cess, if applicable). - **KKC Not Applicable**: Since the invoice was raised before the introduction of KKC, you are not required to charge KKC on that invoice, irrespective of when the payment is received.
2. **Payment Received On or After June 1, 2016**: - **KKC Applicability**: The KKC would not be applicable to the amount already invoiced before June 1, 2016, even if the payment is received after this date. - **Invoice Date**: The service tax rate applied should be the one in effect at the time of issuing the invoice.
### **Telecom Operator’s Message**
The message from Idea suggests that the KKC will apply to any unpaid amounts as on June 1, 2016. This aligns with the general understanding that the KKC should be applied to payments received on or after June 1, 2016, if the invoice was issued before this date. This message could be a reminder for customers to settle any outstanding bills to avoid additional charges due to the new cess.
### **Summary**
- **Service Rendered and Invoice Raised Before June 1, 2016**: Krishi Kalyan Cess is not applicable. - **Payment Received On or After June 1, 2016**: No KKC should be charged on such payments if the service was rendered and invoiced before the cess was introduced.
### **Key Points**
- Ensure your accounting and invoicing systems reflect the correct rates and follow the Point of Taxation Rules. - For any outstanding payments related to services invoiced before June 1, 2016, no KKC should be added.
### **Consultation**
For specific queries or complex scenarios, consulting with a tax professional or legal advisor is advisable to ensure compliance with the latest regulations and correct application of service tax and cess.
CAclubindia
