Krishi Kalyan Cess 

Krishi Kalyan Cess (KKC) is a new cess introduced by our present Union Finance Minister Arun Jaitley in the Budget 2016 – 2017. This KKC is supposed to be levied at a rate of 0.5% on all Goods and Services from 1st June 2016. Already the Government charges the Service taxes at the rate of 14% and Swachh Bharat Cess at a rate of 0.5% and with the introduction of Krishi Kalyan Cess (KKC) the rate would effectively go up to 15%. The rate of Service Tax is gradually increasing as years pass on. Slowly the rate may move closer to the Goods and Service Tax (GST) rate, i.e., between 17% to 18% which is expected to be applicable soon. As everyone is having so many doubts about KKC here,

What is the Meaning of Krishi Kalyan Cess
Krishi Kalyan Cess is introduced for improving the Agricultural Facilities. KKC is levied in accordance with the provision of Chapter VI of the Finance Act, 2015.

Areas where Krishi Kalyan Cess is Applicable
Krishi Kalyan Cess is applicable, where the service tax collected by Central Government on Goods and Services. KKC would be applicable on all your Payments for Services like
  • Internet Bills.
  • Restaurant Bill Payment.
  • Property under Construction.
  • Telephone bills.
  • Air Travel Agent.
  • Payment of Rents.
  • Digital Advertisements.
Krishi Kalyan Cess is calculated in the same way as Service tax is calculated. Therefore, Krishi Kalyan Cess would be levied on the same taxable value as service tax. KKC is not to be calculated on Service Tax but on the taxable value of the service provided. The percentage of tax according to the category is given in the table.
Particulars Amount
  • Service Tax 14%
  • Swachh Bharat Cess 0.5%
  • Krishi Kalyan Cess 0.5%
  • Total 15%

This KKC is supposed to be levied at a rate of 0.5% on all Goods and Services from 1st June 2016. 

These are provisions of Krishi Kalyan Cess.
Applicability of CENVAT Credit on KKC

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 Cenvat Credit shall not be utilized for payment of KKC on any other duty or tax or cess. So, here there is applicability of CENVAT Credit on KKC. 

Point of Taxation for Krishi Kalyan Cess

The Point when a service shall be deemed (considered) to have been provided is known as Point of Taxation. Here Rule 5 of POT rules 2011 is covered under KKC. This is about Rule 5 of POT Rule.

Rule 5 (Payment of Tax in case of new Services):

In a case of new services which was previously not covered due to negative list or exemption notification and is taxed for the first time.
  • No tax shall be payable to the extent the invoice issued and the payment received for such invoice before such service became taxable.
  • No tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within 14 days of the date when the service is taxed for the first time.
Applicability of Krishi Kalyan Cess on RCM (Reverse Charge Mechanism)

KKC will be applicable on all taxable services, so here Reverse Charge Mechanism is also applicable. Therefore, Krishi Kalyan Cess is payable along with service tax on the services availed and hence, covered under reverse charge mechanism.

Applicability of Krishi Kalyan Cess on Works Contract Service

According to Rule 2A of Valuation Rules of Service Tax the tax along with Swachh Bharat Cess and KKC needs to be applied on the taxable value. The Service Tax Rate would be as given below:
  • In case of original works: 6% (15% x 40%) 
  • Other than original works: 10.50% (15% x 70%)

Points to be Remembered:

  • KKC is applicable with effect from 01/06/2016.
  • KKC is collected or levied only on taxable services.
  • As this KKC is collected on the value of services and the Service Tax rate would be 15% with effect from 01/06/2016.
  • The effective increase of Service tax is 15% that is Service Tax is 14%, Swachh Bharat Cess is 0.5%, and KKC is 0.5% so totally 15%.
  • In Krishi Kalyan Cess the Cenvat Credit is available and shall be utilized only for the payment of KKC.
  • There should need to maintain separate accounts books for KKC.
  • Refund of this Krishi Kalyan Cess shall also be allowed as the Cenvat Credit. Further, refund of this KKC shall be allowed to Exporter of Goods as well as Exporter of Service as there is no restriction of its availment. A suitable amendment is awaited in Cenvat Credit Rules 2004 as well as refund notifications.
  • This Cess shall be applicable only on the abated value in case of services covered under abatement scheme.
  • Krishi Kalyan Cess shall also be applicable to the services covered under Reverse Charge Mechanism.
  • Separate accounting codes for its payment shall be released soon.
  • Rule 5 of Point of Taxation Rules (POT) 2011 need to be referred for its applicability in the case of ongoing contracts on 01/06/2016. Thus, if payment is made before 01/06/2016, then this cess is not applicable.


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