Budget brings 2 new cesses, hikes environment levy

Government today proposed Krishi Kalyan Cess and Infrastructure Cess, raised incidence of Environment levy, while deciding to do away with as many as 13 cesses which do not yield more than Rs 50 crore in a year.
Krishi Kalyan Cess will be levied on all taxable services at the rate of 0.5 per cent with effect from June 1, 2016, to finance and promote initiatives to improve agriculture, Finance Minister Arun Jaitley said in his Budget speech.
"Krishi Kalyan Cess on all taxable services will increase service tax rate by 0.5 per cent to 15 per cent," Nangia & Co Managing Partner Rakesh Nangia.

Besides, Infrastructure Cess has been imposed at the rate of 1 per cent on small petrol, LPG, CNG cars, 2.5 per cent on diesel cars of certain capacity and 4 per cent on other higher engine capacity vehicles, SUVs and bigger sedans.
However, three wheelers, electrically-operated vehicles, hybrid vehicles, hydrogen vehicles based on fuel cell technology would be exempt from the infrastructure levy.
Besides, motor vehicles which after clearance have been registered for use solely as taxi, ambulances, cars for physically handicapped persons will also be exempt from this cess.

'Clean Energy Cess' levied on coal, lignite and peat has now been renamed as 'Clean Environment Cess'. Its incidence has been increased to Rs 400 per metric tonne, from Rs 200 per metric tonne.

The 'Oil Industries Development Cess' will be levied at the rate of 20 per cent, instead of specific rate of Rs 4,500 per metric tonne. "The amendment in the Oil Industry (Development) Act, 1974, will be effective from the date of assent to the Finance Bill, 2016," the Budget said.
Further, in order to reduce multiplicity of taxes, associated cascading and to reduce cost of collection, Jaitley also abolished 13 cesses, levied by various ministries in which revenue collection is less than Rs 50 crore in a year.