Eating out, phone calls now costlier on Swachh cess

Consumers will have to shell out more for eating out, making phone calls and travel as the 0.5 per cent Swachh Bharat cess on taxable services has come into effect from Sunday.

The imposition of the cess has pushed up the service tax rate from 14 per cent to 14.5 per cent on all taxable services. According to Revenue Secretary Hasmukh Adhia, the Government expects to collect around Rs 10,000 crore from Swachh Barat cess for the full year. So in the remaining four and-a-half months of the current financial year which ends on March 31, 2016, the cess is likely to yield about Rs 3,800 crore to the national exchequer.

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The Swachh Bharat cess will be allocated for Prime Minister Narendra Modi's cleanliness drive which includes constructing toilets for the poor. The service tax on restaurant bills will go up from 5.6 per cent to 5.8 per cent following the 0.5 per cent Swachh Bharat cess. The Finance Ministry has also clarified that the Swachh Bharat cess will not apply on services for which payments have been received prior to November 15. The decision to impose 0.5 per cent cess will translate into a tax of 50 paise only on every Rs 100 worth of taxable services.

Explaining the provisions for the levy of cess, the Ministry said it would be calculated on the abated value or value arrived as per the Service Tax (Determination of Value) Rules, 2006. For air-conditioned restaurants the cess would be 0.5 per cent of 40 per cent of the billed amount which in effect works out 0.2 per cent after the abatement is taken into account. 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.

Travel in railways' upper class categories has also become costlier with a service tax levy of 14 per cent and a Swachh Bharat cess of 0.5 per cent. According to the railway ministry circular, the levies make for a 4.35 per cent hike for travel in First Class and all AC Classes from November 15. Service tax of 14 per cent and Swachh Bharat cess of 0.5 per cent are chargeable on 30 per cent of total passenger fare equivalent to 4.35 per cent of the total fare on first class and all AC fares, the circular said.

However, the service tax will not be applicable for tickets issued before November 15. Neither would the levy be applicable for general and sleeper-class travel. With the hike, AC-I fares on mail and express trains from New Delhi to Mumbai are up by Rs 206 while the rise is of Rs 102 for AC-III fares from New Delhi to Howrah. On the Delhi-Chennai route, the increased fare works out to about Rs 140 for the AC-II segment.

Finance Minister Arun Jaitley had in Budget 2015-16 proposed to levy a Swachh Bharat cess of up to 2 per cent on all or certain services, if the need arises. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives, the Finance Ministry had said while notifying the Swachh Bharat cess. The government had in Budget 2015-16 estimated to collect over Rs 2.09 lakh crore from service tax. The Rs 3,800 crore collection from the cess would be over and above that.