The CESS will increase the service tax rate from 14% to 14.5% on all taxable services, including mobile telephone services, travel and PAN (Permanent Account Number) card, from November 15.
“The provisions of SBC @ 0.5% under the Finance Act, 2015, are effective from November 15, 2015. Accordingly, service tax rate (for PAN) is increased from 14 per cent to 14.50 per cent,” PTI quoted an official notification as saying.
A PAN card issued by the Income Tax Department to individuals or entities to track their financial activities will become dearer by Re 1, now costing Rs 107, including Rs 93 processing fee and Rs 14 as the newly implemented service tax.
By getting CESS under SBC the government is first taking about bringing Corporate tax down by 5 points and here in this case every member is going to pay 0.5 % of its purchase cost as cess and unknowingly will end up eating into the margin of his business. The Centre expects to generate around Rs 10,000 crore from SBC each fiscal. But, with just four-and-a-half months left in the 2015-16 fiscal, it aims at Rs 3,800 crore till 31 March, 2016.
Is It Eating Partners margin?
The SBC of 0.5% will be paid by all citizens who avail of any service that is taxable under service tax. What this means is that for every Rs 100 spent in availing any taxable service, Rs 0.50 will be paid to the government as SBC. This will apply to services like a/c restaurants, rail, road and air services, lottery services, insurance premiums and the like which means all those availing such services will now have to pay an extra 0.5%. However, the SBC will not be levied on services listed under the negative list or those that have been exempt from service tax.
Channel Reaction:
“Bringing down corporate tax is part of the long term path. However, imposing the 0.5% cess is a near term fix for the Swatch Bharat project. It will increase cost of the projects and services availed by customers by that much. Since it is recoverable from customers, it will not eat into the margins.”, says Rushab Shah, president of TAIT.
The Tax committee of Infotech Software Dealers Association (ISODA) feels that SBC is only part of Excise Duty and Service tax which are part of the Indirect Taxes. Notable point here is that SBC is not applicable on Customs Duty, even though it is part of Central Levy of Indirect Taxes. Therefore, even if Govt is talking about bringing down the Corporate Tax, both the points are not related to each other.
“We met the Jt Secretary Indirect Taxes with regard to non-availability of Cenvat Credit of SBC because of which the margins are eroded by 0.5, he responded, though verbally only that he is willing to look into the anomaly. Pertinent to note that Govt is not averse to the idea of making SBC Cenvatable”, an official statement from the association added.