What is Krishi Kalyan Cess?
About 58% of the Indian population depends upon agriculture to run their livelihood but the contribution of the industry to Indian GDP is nearly 17-18%. Thus, the Narendra Modi Government included an agriculture-friendly initiative in the 2016 Union Budget, namely Krishi Kalyan Cess (KKC). This cess was introduced by then Finance Minister, Late. Arun Jaitley. The new session imposed a 0.5% tax on all the consumer goods and services to financially support agriculture and for the welfare of farmers.
The Central Board of Excise and Customs has produced an explanatory letter (DOF No. 334/8/2016-TRU dated 29.02.2016) that stated, “Enabling provision for levy of Krishi Kalyan Cess: It is proposed to be levied with effect from 1st June 2016 on any or all the taxable services at the rate of 0.5% on the value of such taxable services. The credit of Krishi Kalyan Cess paid on input services shall be allowed to be used for payment of the proposed Cess on the service provided by a service provider.”
The central government imposes cess i.e., a classified tax that is collected for a particular goal. According to Article 270 of the Indian Constitution, “the central government is not obliged to share the cesses levied by the Parliament for reserved projects with state governments; but the Centre must distribute a chunk of revenue amassed from other taxes among the States. Also, optimum money can be transferred to the next year’s budget.”
The session is authorized under Clause 158 in Chapter VI of the Finance Bill, 2016. It came into effect on 1st July 2016. This cess also revised the service tax to 15%. For clarification, the service tax of 14%, now includes 0.5% of Swachh Bharat Cess and another 0.5% of Krishi Kalyan Cess. The consolidated fund through KKC is assigned by the Parliament of India. KKC also facilitates Cenvat credit. This drafted tax got a budget target of Rs. 5000 Crore, by the government of India. The KKC does not permit on service records like ‘Negative List’ and ‘Mega Exemption List’ as per the Notification No. 22/2015.
The KKC is not reliant upon a service tax but is a taxed value added to the consumption of goods and services by the public. For example When you visit a cinema hall and the ticket costs you Rs.100, then the service tax will be Rs.14 as per 14% of service tax levied plus Rs.1 including the Swachh Bharat Cess (0.5%) and Krishi Kalyan Cess (0.5%). Thus, the total bill will be Rs.115. Similarly, KKC is calculated over acceptable service and goods.
The government has concluded two necessities of the Krishi Kalyan Cess that is suggested under the realm of Rule 5:
- No tax should be
- payable if the payment has been received before the service becomes taxable and the bill has been issued within 14 days of the date from the first time when the service was taxed.
Thus, the application of cess is done from the date of its submission onwards i.e., before or after 1st June 2016, with reference to Rule 5 of the Taxation Rules, 2011. Here are some examples to clarify the calculations:
- CASE I: If the receipt of the payment, as well as the issue of the bill, were accepted by the consumer before 1st June 2016, then the situation is not taxable.
- CASE II: If the receipt of the payment was accepted before 1st June 2016. And the bill is issued within 14 days from the service of taxability, then also the situation is tax-free.
- Case III: The money is taxable when the issue of the invoice within 14 days from the date of service was not submitted.
This initiation promised us a better ‘Indian agricultural condition’ by the mixed efforts of the Indian government and the Finance Minister. The land of India is kind of a treasure to the raw products as it is called “sonchiraiya” i.e. the golden bird. But finance is always considered as a huddle in its path. The KKC will solve the economic stress and trauma of people to accept agriculture as the way of running their livelihood. It is an evident cess to encourage people to invest in this field.
With an insight into the matter, Krishi Kalyan Cess is the money collected to serve only the agricultural section of the society. The government must acquire powers to impose, charge, and collect the cess. Although KKC is payable along with the service tax and is also applicable to Reverse Charge Mechanism (RCM) service, but it must be remunerated independently without the government service tax. The system must include an independent account book and the collections should be done under a distinct code of accounting. It needs to occupy a different set of the section in the invoice. There should be a refund scheme for the cess. Also, it must allow the “Exporter of the service” as the quantity check of “Exporter of goods” is unavailable.
The underlined invoice for improvising the Krishi Kalyan Cess is commendable. This initiative is very thoughtful of the government to develop an agrarian economy. It will solve the one-sixth of the country’s wonder to set behind the barriers of getting more than 16% of GDP contribution. After the revolutions in improvising the agricultural quality of India, the Krishi Kalyan cess is the first noble and major initiative to encourage the quantity of population to get involved in this field.
Coping up with the encouragement, Krishi Kalyan Cess is definitely increasing the price of goods. Then the Goods and Service Tax (GST) is adding up to this drawback. This addition and change in taxation status quo frequently turn cesses like these into unpleasant ones. With the rising demand for country ingrown and regional food supply in emergencies like the present times, if we look at the bigger picture, Krishi Kalyan Cess is going to empower farmers, who are ultimately going to meet this grown demand for food production.