Swachh Bharat Cess and How it affects you

When I last time rode in an Ola Taxi my invoice came in my inbox with an extra line in the Tax Break Up i.e Swachh Bharat Cess. In short it is SBC. Then I enquire about this and found that Swachh Bharat Cess is applicable to all services where service tax is applicable and 0.5% in excess of service tax which is to be levied from 15th November, 2015. Now, what is Swach Bharat Cess and how does it affect your personal finances.

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Swacch Bharat Cess

What is cess?

Cess is a tax on tax which is levied by the government for a specific purpose, for example, 3% Education cess, Higher Education cess etc., service tax at 14% is inclusive of 3% cess. Generally, cess is collected until the time the Government gets required fund for that purpose.

[Tweet “In this world, nothing can be said to be certain, except death and taxes. – Benjamin Franklin”]

What is Swachh Bharat Cess?

After a whopping majority in 2014 and coming to the power, Prime Minister Mr. Narendra Modi started Swachh Bharat Abhiyan for clean India through better sanitation and solid waste management. This will help to reduce various diseases significantly. After that in the general budget for FY 2015-16, govt. has proposed to levy up to 2% on the taxable services along with the service tax. This fund will be used to promote Swachh Bharat Abhiyan. Now on 6th November 2015, the central government has notified about the Cess at a rate of 0.5%, effective from 15th November 2015.

Hence, now onwards the service tax is to be levied on taxable services at a rate of 14.5% which was earlier 14%. SBC needs to be charged separately on the invoice, accounted for separately in the books of account. SBC is to be charged separately after service tax as a different line item on the invoice. It can be accounted and treated similarly to Education cesses.

Expected income of Government through Swachh Bharat Cess?

The restaurants bill, telephone bill, airline tickets and cab services will be costlier with the introduction of Swachh Bharat Cess. By introducing Swachh Bharat Cess, Government is expected to collect Rs 3800 crore for the rest of this Financial year. With this projection, the government can collect RS 10000 Cr for, an entire financial year.

How does it affect your personal finance?

For air-conditioned restaurants, the cess would be 0.5 per cent of 40 per cent of the billed amount i.e 0.2 per cent. The cumulative service tax and Swachh Bharat Cess liability would be 5.8 per cent (14.5 per cent of 40 per cent) of the total amount charged. The same thing is applicable for rides on AC Cabs. So now onwards online taxi aggregators like Uber, Ola etc will charge 0.2% on your billed amount.

If your total premium for the insurance is Rs 1 lakh for this year and which is to be paid after 15th November 2015, you have to pay an extra sum of Rs 500. This is not surely a significant amount, but if you add the sum where you paid the taxes for the services, you will surely notice that this cess has created a small hole in your pocket. So, you revisit your budget and make the plan accordingly to take care of the expenses as well as saving.

Also Read: How a Credit Card can ruin your Finance and How to Protect it

Without knowing this, luckily I have renewed my health insurance on 14th November and paid only 14% as service tax and, in turn, saved some money.

2 Comments

  1. Williamgede May 7, 2016
    • SUMAN KUMAR GAYEN May 7, 2016

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