The government on Thursday clarified the Swachh Bharat cess of 0.5% would be levied in the same proportion as the overall service tax, clearing the mounting confusion over the levy to be introduced from November 15.
There are many services where full 14 per cent rate does not apply and are subject to reduced levy. There was a confusion whether 0.5 per cent cess would apply to 14 per cent or reduced service tax. The government said it would be applicable to reduced tax rate.
As there is abatement of 60 per cent in food and beverages, the department of revenue said the cess will be levied on just 40% of the total amount charged, that is 0.2%.
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The proceeds from this cess will be used for financing and promoting Swachh Bharat initiatives.
It also clarified that in cases where invoice was raised before the service becomes taxable on Sunday and payment is made within the next 14 days, which is November 29, there will be no liability of Swachh Bharat Cess.