It is a type of Cess which will be levied and collected in accordance with the provisions of Chapter VI of the Finance Act, 2015, called Swachh Bharat Cess (SBC).
Service Tax is a type of tax that you pay on services rendered.
SBC will be imposed as service tax on all the taxable services at the rate of 0.5 per cent of the value of taxable service.
With the aim to finance and promote Swachh Bharat initiatives or for any other purpose relating, the SBC has been imposed. Swachh Bharat Cess will be applicable on services which are provided on or after 15th Nov, 2015.
How is SBC calculated?
SBC will be calculated in the same way as Service tax is calculated. So, SBC would be levied on the same taxable value as service tax.
The effective rate of service tax plus SBC, after the introduction of SBC, will be 14 per cent + 0.5 per cent.
Note that SBC is not a cess on Service Tax.
SBC will be levied at 0.5 per cent on the value of taxable services.
Say, for example, the effective Swachh Bharat Cess serving of food or beverages by a restaurant, eating joint, those are having the facility of air-conditioning or central air-heating in any part of the establishment, would be 0.5 per cent.
The cumulative service tax and Swachh Bharat Cess liability would be [14% ST + 0.5% SBC] of 40% of the total amount, that will be 5.8% of the total amount charged.
Earlier, the rate of Service Tax was charged at 14 per cent, the effective rate of tax was 5.6 per cent of the total amount charged.
Where is SBC applicable?
The government has notified that SBC shall be applicable on all taxable services except services which are either fully exempt from service tax or those covered under the negative list of services.
The provisions including those related to computation of taxable value, assessment, exemption, payment, penalty applicable to service tax would also apply in respect of Swachh Bharat Cess.