Wednesday, June 8, 2016

Krishi Kalyan Cess-Hidden Misery

Krishi Kalyan Cess (KKC) at the rate of 0.5% is being imposed on all taxable services with effect from 01.06.2016 on all taxable services provided or agreed to be provided by the service provider. The revenue collected from this Cess will be utilised by the government for improving agricultural sector and for taking initiatives to promote agricultural activities. However, the complicated provisions enshrined for this Cess tend to defeat the 'Kalyankari intention' of the government.
It is provided that only a provider of output service shall be allowed to take cenvat credit of the Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016. This has the consequence of raising doubt as regards availment of cenvat credit of KKC levied on input services received by a manufacturer cum service provider. Not only this, it is being provided that the cenvat credit of any duty shall not be utilised for payment of KKC leviable under section 161 of the Finance Act, 2016. In the opinion of authors, literal interpretation of the provision leads to conclusion that only a service provider can avail the cenvat credit of KKC imposed on input services availed by it and the credit so availed can be utilised for payment of KKC and no other duty. 

Taxability of services provided by Senior Advocates

A senior advocate is an advocate, who with his consent, be designated as senior advocate if the Supreme Court or a High Court is of opinion that by virtue of his ability and special knowledge or experience in law, he is deserving of such distinction. Earlier, CBEC made services of senior advocate taxable under forward charge. Now, CBEC further issued three notifications 32/2016, 33/2016 and 34/2016. The impact of these notifications are as follows:

1. Earlier, legal services provided by senior advocates to any person carrying out any activity relating to industry, commerce or any other business or profession were not exempt from service tax. Now, legal services provided by senior advocates would be exempt from service tax, if services are provided to –

- Any person other than business entity, or