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27 May 2016

Amendments w.r.t. Krishi Kalyan Cess

Finance Act, 2016 has introduced Krishi Kalyan Cess w.e.f. 1st June, 2016. Krishi Kalyan Cess is leviable on all taxable services, other than services which are fully exempt from Service Tax or services which are otherwise not liable to Service Tax under section 66B of the Finance Act, 1994, at the rate of 0.5%.

Yesterday, Central Government has issued Circular No. 194/4/2016-ST vide F. No. 354/31/2016-TRU to notify following accounting codes for payment of Krishi Kalyan Cess:

Krishi Kalyan Cess (Minor Head) Tax Collection Other Receipts (Interest) Deduct Refunds Penalties
0044-00-507 00441509 00441510 00441511 00441512

In addition, Central Government has issued six notifications to make following changes, mostly in the nature of clarifications, related to KKC:

  1. Service providers are allowed to avail CENVAT Credit of KKC. Further, CENVAT of KKC can be utilized only for payment of KKC. Also, CENVAT of other duties/tax can not be utilized for payment of KKC. (Notification No. 28/2016-CE(NT))
  2. Provisions of reverse charge mechanism shall be applicable mutatis mutandis for KKC. (Notification No. 27/2016-ST)
  3. No KKC on services exempt from service tax. (Notification No. 28/2016-ST)
  4. In case of services covered under abatement, KKC shall apply only on specified percentage of taxable value. (Notification No. 28/2016-ST)
  5. Exporters can avail rebate benefit of KKC. (Notification No. 29/2016-ST)
  6. SEZ units or developers can avail ab-initio exemption/refund in respect of KKC. (Notification No. 30/2016-ST)
  7. Service providers who has opted to pay service tax under Rule 6 STR, 1994 shall have the option to pay KKC calculated as under:

(Service Tax liability calculated as per Rule 6 * Effective rate of KKC i.e. .5%)/(rate of service tax specified in section 66B i.e. 14%)

(Notification No. 31/2016-ST)