To provide a boost to the clean India initiative, the government on Friday said it will impose a Swachh Bharat cess of 0.5% on all services liable for service tax, effective from November 15, 2015.
In his budget speech in February, finance minister Arun Jaitley had proposed an enabling provision to levy the cess at a rate of 2% or less on all or certain services, if the need arose. This had come along with the increase in the service tax rate from 12.36% plus education cess to 14%.
“Swachh Bharat Cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat. The 0.5% levy will translate into a tax of 50 paisa only on every Rs 100 worth of taxable services,” the finance ministry said in a statement. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives of the government, it added.
The Swachh Bharat cess will be an additional levy, making the effective service tax rate 14.05% against the current 14%.
In budget 2015-16, the government had put the service tax collection target at over `2.09 lakh crore. It is expected that the Swachh Bharat cess would yield Rs 400 crore over and above the service tax collections.
Explaining the rationale behind the levy, the ministry added that given the current population of more than 1.2 billion, India needs to have a “fair share of cleanliness concerns”.
Given the impact of cleanliness on public health leading to generation of diseases such as malaria, dengue, diarrhea, jaundice, cholera etc. the cess will help in improving public health.
“Expenditure on health adds up to Rs 6,700 crore annually (approximately `60 per capita). Increased allocation for Swachh Bharat Abhiyan can prevent many of these diseases, with consequential benefit to one and all,” the statement said.