Impact of Krishi Kalyan Cess [KKC] on Retaurants, Traveling & Internet @0.5% W.E.F 1st June,2016

Written by Ravi Sankar Robbi

Updated on:

Now Cell phone bills, Internet, Traveling & eating in restaurants becoming premium because of introduction of Krishi Kalyan Cess [KKC] by 0.5%.

On Luxury cars having the price of more than Rs.10 Lakhs will attract additional 1% charge. Since Modi government decided to include Krishi Kalyan Cess in Service Tax during 2016-17 budget announcement. It is going to be implemented from 1st June,2016.

Till the the Service tax charged is 14.5%, due to inclusion of Krishi Kalyan Cess of 0.5%, now Service tax is raised to 15%.


As per Chapter VI of Finance Act, 2016, Krishi Kalyan Cess (KKC) will be applicable @ 0.5% with effect from 1st June 2016.

It will be levied in the form of an additional levy of Service tax

> Change in effective rate of Service Tax (effective from 01.06.2016)

Effective rate of service tax is being increased from 14.5% to 15% by levying Krishi Kalyan Cess @0.5% on value of taxable services.

KKC was announced in the Union Budget, 2016-17.

> CENVAT Credit:

Govt has made amendments in CENVAT Credit Rules to allow credit of Krishi Kalyan Cess vide NOTIFICATION No. 28/2016 – Central Excise (N.T.) dated 26.05.2016.

> Invoicing and accounting

KKC needs to be charged separately on the invoice, accounted for separately in the books of accounts and paid separately under separate accounting code.

Each component of Service Tax (i.e. service tax 14%, SB Cess 0.5% and Krishi Kalyan Cess 0.5%) should be separately shown on invoice and should be separately accounted for & paid separately under separate accounting code (expected to be notified shortly).

> Point of Taxation

Since KKC is a new levy of service, Rule 5 of the Point of Taxation Rules, 2011 (as amended) shall be applicable.

According to the said Rule, *tax shall not be levied only in 2 circumstances :

(i) In case where payment has been received and invoice is raised before the applicability of KKC, i.e. prior to 1 June 2016;

(ii) In case payment has been received before the applicability of KKC and invoice is raised within 14 days, i.e. upto 14 June 2016,

On perusal of the above circumstances, it appears that any amount received on or after 1 June 2016 for services provided prior to 1 June 2016, KKC shall be applicable.

The point worth noting is that Rule 5 of POT rules is not same as it used to be at the time of SBC owing to addition of an explanation requiring levy of KKC in all cases except 2 situations mentioned above (i & ii).In such cases, the service provider shall have to raise a separate debit note / supplementary invoices for such clients.

Therefore ,
_PAY ALL YOUR BILLS BEFORE 1st JUNE TO AVOID NEW TAX since this will get applicable for all bill payments made after 1st June even if the bill was issued before 1st June.

As per Section 161 of the Finance Act, 2016, the Service tax stands increased to 15% including the levy of Krishi Kalyan Cess @ 0.5% w.e.f. 1st June, 2016. This will also apply on any unpaid amount as on 1st June, 2016. We urge you to pay your dues (if any) on or before 31st May to avoid the additional 0.5% charge which will reflect in your next bill.

Accounting Code for payment of *Krishi Kalyan Cess (KKC)* has been notified to be:
Interest on KKC:
Penalty on KKC:

KKC is applicable @ 0.5% on all services w.e.f. 1st June, 2016.

Author is a Qualified CMA with an experience of more than 8 years in the industry. He is also an All India Rank holder in both Inter (AIR-26) & Final (AIR-46) examinations of ICAI. He loves to writes articles on Income Tax & GST.