Soon after the Bihar assembly polls, the Narendra Modi government has announced a 0.5% Swachh Bharat cess applicable on all services presently liable to service tax, with effect from November 15. With this, the effective service tax rate would be 14.5%.
The finance ministry stated in New Delhi that this levy will translate into a tax of 50 paisa on every Rs 100-worth of taxable services, the proceeds of which will be exclusively used for Swachh Bharat initiatives.
“The Swachh Bharat cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat,” the ministry stated.
The provision for a cleanliness cess on all or any of the services was announced in Budget 2015-16. The ministry stated that by spending on cleanliness, many diseases could be prevented and the associated healthcare expenditure could be saved.
Swachh Bharat is among the major initiatives of the Modi government, which has embarked on a major drive to ensure cleanliness across the country.
In his Budget speech on February 28, finance Minister Arun Jaitley had said: “This cess will be effective from a date to be notified. Resources generated from this cess will be utilised for financing and promoting initiatives towards Swachh Bharat”.
The government had in Budget 2015-16 estimated to collect over Rs 2.09 lakh crore from service tax. The R400-crore collection from the cess would be over and above that.