Krishi Kalyan Cess-Kalyan Doubtful, Confusion Sure
WE received this mail from a Netizen:
The new levy "Krishi Kalyan Cess" is causing lot of confusions for the assessee. Some of the concerns need to be clarified by the CBEC in the interest of ease of doing business on the lines of FAQ released for SBC:
1. KKC was supposed to be a levy on all or any services. Now it seems that the same is applicable on all services including the reverse charge mechanism and partial reverse charge mechanism. Wherever deeming fictions are introduced in law, they have led to protracted litigation. Case in point is the deeming fiction in the Constitution of India for sale of goods. Now the deeming fiction introduced in the Finance Act, 1994 vide Section 67A amendment will certainly result in equal amount of litigation in future.
2. Notification No.10/16-ST is effective from 01st March, 2016, but Sec 67A amendment came into effect from14th May, 2016. Is there any statutory provision under law for re-determining the point of taxation once the service is rendered and invoice is issued by following Rule 3 of POTR, 2011? If it is considered as a new levy, it is nothing but increase in the service tax rate. Hence Rule 4 (Determination of rate of taxation in case of change in effective rate of tax) of the POTR, 2011 should apply. Many tax experts are interpreting Rule 5 (Payment of service tax in case of new services or new levy) of POTR, 2011 and advising that all invoices unpaid as on 01st June, 2016, the service provider needs to issue a supplementary invoice for collecting KKC. There is no non-obstante clause in Rule 5 and there is no hierarchy for interpretation of the rules under POTR, 2011. Hence if the point of taxation is decided under Rule 3, where is the need for Rule 5?
3. KKC is fungible in the hands of an output service provider against his obligation to pay KKC and it cannot be utilized against any other taxes. In case of manufacturer, who incidentally is provider some output services also, what would be treatment? Is that the manufacturer needs to maintain separate books of accounts to establish the one to one correlation in respect of the input services on which he can take credit of KKC to utilize against the payment of KKC on the output services to be provided by him?