Krishi Kalyan Cess Interview Questions & Answers

  1. Question 1. What Is Kkc?

    Answer :

    It is a Cess called as Krishi Kalyan Cess, which shall be levied and collected in accordance with the provisions of Chapter VI of the Finance Act, 2016, as Service tax on all the taxable services at the rate of 0.5% on the value of such taxable services.

  2. Question 2. For What Purpose(s) Kkc Is Proposed To Be Levied?

    Answer :

    KKC is proposed to be levied for the purposes of financing and promoting initiatives to improve agriculture and farmers welfare or for any other purpose relating thereto.

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  4. Question 3. What Is The Date Of Applicability Of Kkc?

    Answer :

    KKC would be levied at the rate of 0.5% on the value of all taxable services with effect from June 1, 2016 vide Section 161 of the Finance Act, 2016.

  5. Question 4. Whether Kkc Would Be Leviable On All Taxable Services?

    Answer :

    Yes, KKC would be levied on all taxable services. In this regard, the Central Government vide Notification No. 28/2016-ST dated May 26, 2016 has provided that KKC shall not be leviable on services which are exempt from Service tax by a Notification issued under Section 93(1) or Special Order issued under Section 93(2) of the Finance Act, 1994 (“the Finance Act”) or otherwise not leviable to Service tax under Section 66B thereof.

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  7. Question 5. Whether Kkc Would Be Leviable On An Activity Which Is Excluded From The Definition Of ‘service’?

    Answer :

    No, such activity would not be leviable to KKC. Following activities are excluded from the definition of ‘Service’ under Section 65B(44) of the Finance Act:

    (a)An activity which constitutes merely,–

    • a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
    • such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution; or
    • a transaction in money or actionable claim;

    (b)A provision of service by an employee to the employer in the course of or in relation to his employment;
    (c)Fees taken in any Court or tribunal established under any law for the time being in force.

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  9. Question 6. Whether Kkc Would Be Leviable On Services Contained In The Negative List Of Services?

    Answer :

    No, KKC would not be leviable on services contained in the Negative List of services under Section 66D of the Finance Act.

  10. Question 7. Whether Kkc Would Be Leviable On Exempted Services?

    Answer :

    KKC shall not be leviable on services which are exempt from Service tax by a Notification issued under Section 93(1) or Special Order issued under Section 93(2) of the Finance Act.

    The services exempted by a Notification issued under Section 93(1) of the Finance Act are as under:

    • Services exempted under the Mega Exemption Notification vide Notification No. 25/2012-ST dated June 20, 2012;
    • Services exempted, to specified percentage under the Abatement Notification No. 26/2012-ST dated June 20, 2012;
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  12. Question 8. What Will Be The Effective Rate Of Service Tax W.e.f June 1, 2016 After Applicability Of Kkc?

    Answer :

    The effective rate of Service tax shall be 15% with effect from June 1, 2016 i.e.  Service tax @ 14%, Swachh Bharat Cess (“SBC”) @ 0.5% and KKC @ 0.5% on value of taxable services.

  13. Question 9. How Kkc Will Be Calculated?

    Answer :

    KKC would be calculated in the same way as Service tax is calculated and would be levied on the gross value of taxable services and will be computed in accordance with Section 67 of the Finance Act and the Rules made there under.

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  15. Question 10. Whether Kkc Is A ‘cess On Tax’ And We Need To Calculate Kkc @ 0.5% On The Amount Of Service Tax Like We Were Earlier Doing For Calculating Education Cess And She Cess?

    Answer :

    No, KKC is not a Cess on Service tax. KKC shall be levied @ 0.5% on the value of taxable services.

  16. Question 11. How Kkc Will Be Calculated For Services Where Abatement Is Allowed?

    Answer :

    The Central Government vide Notification No. 28/2016-ST dated May 26, 2016 has clarified that KKC will be levied on value of taxable services after availing the benefit of abatements by way of an exemption provided vide Abatement Notification No. 26/2012-ST dated June 20, 2012 i.e. KKC would be computed on abated value of taxable services.

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  18. Question 12. What Will Be The Effective Rate Of Service Tax In Case Of Specified Services Under The Abatement Notification Like Gta Services (other Than Used Household Goods) After Levy Of Kkc?

    Answer :

    Service tax is required to be paid on 30% of value of taxable service, after abatement of 70% as provided under the said Abatement Notification. The effective rate of Service tax including SBC and KKC would be 4.50% (i.e. 30% of 15%).

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  20. Question 13. How Kkc Would Be Calculated On Specified Services Covered Under Service Tax (determination Of Value) Rules, 2006 [“the Service Tax Valuation Rules”]?

    Answer :

    The Central Government vide Notification No. 28/2016-ST dated May 26, 2016 has clarified that the value of taxable services for the purpose of KKC shall be the value as determined in accordance with the Service Tax Valuation Rules.

  21. Question 14. What Will Be The Effective Rate Of Service Tax In Case Of Works Contract Service After Levy Of Kkc?

    Answer :

    As per Rule 2A of the Service Tax Valuation Rules, KKC needs to be applied along with Service tax and SBC on specified portion and the effective rate of Service tax in case of Works contract Service would be as under:

    • Ø  In case of original works: 6% (15%*40%); and
    • Ø  Other than original works: 10.50% (15%*70%)
  22. Question 15. What Will Be The Effective Rate Of Service Tax In Case Of Ac Restaurant Services And Outdoor Catering Services?

    Answer :

    The KKC would be calculated in similar manner on AC Restaurant Services and Outdoor catering services as calculated for Works Contract service . As per Rule 2C of the Service Tax Valuation Rules, KKC needs to be applied along with Service tax and SBC on specified portion.

    Therefore, the effective rate of Service tax after KKC would be as under:

    • Ø  In case of AC Restaurant services: 6% (15%*40%); and
    • Ø  In case of Outdoor catering services: 9% (15%*60%)
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  24. Question 16. How Kkc Will Be Calculated For Services Under Reverse Charge Mechanism?

    Answer :

    The Central Government vide Notification No. 27/2016-ST dated May 26, 2016, has clarified that the KKC would be leviable on specified services under the Reverse Charge Notification No. 30/2012-ST dated June 20, 2012 and all provision for chargeability of Service tax shall be applicable mutatis mutandis for the purposes of KKC also. In other words, KKC along with Service tax shall be paid on taxable services specified under Reverse Charge and Partial Reverse Charge Mechanism as well for Service Receiver to pay the Service tax, SBC and KKC.

  25. Question 17. What Will Be The Point Of Taxation (“pot”) For Determination Of Kkc Taxability For A Service Provider?

    Answer :

    POT in case of new levy on services shall be governed by Rule 5 of Point of Taxation Rules, 2011 (“the POTR”).

    As per Rule 5 read with explanations inserted vide Notification No. 10/2016-ST dated March 1, 2016, only in following two situations (given below), the KKC shall not be payable and in all other cases, KKC is to be paid:

    • Ø  Invoice issued and payment received against such invoice before such service becomes taxable i.e prior to June 1, 2016
    • Ø  Payment received before the service becomes taxable i.e prior to June 1, 2016 and invoice has been issued within 14 days of the date when the service is taxed for the first time.
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  27. Question 18. What Will Be The Pot For Determination Of Kkc Liability In Case Of Service Receiver Under Reverse Charge Mechanism?

    Answer :

    POT in case of Reverse Charge is determined in accordance with Rule 7 of the POTR.

    In terms of Rule 7 of the POTR, point of taxation under reverse charge (except associated enterprises located outside India), shall be as under:

    • Payment made within 3 months – Date of payment;
    • Payment not made within 3 months – Date immediately following the end of 3 months

    In case of associated enterprises, where the person providing the service is located outside India, POT shall be earlier of the following:

    • Date of debit in the books of account of service receiver;
    • Date of Payment

    Recently a proviso has been inserted in the said rule vide Notification No. 21/2016-ST dated March 30, 2016, which provides that where there is change in the liability or extent of liability of Service tax to be paid under Reverse Charge, the POT will be determined as under:

    • Service has been provided and the invoice issued before the date of such change, but payment has not been made as on such date, the POT shall be àthe date of issuance of invoice.
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  29. Question 19. When There Can Be Change In The Liability Or Extent Of Liability Of Service Tax To Be Paid By Service Receiver Under Reverse Charge?

    Answer :

    There can be change in the liability or extent of liability of Service tax to be paid by service receiver under Reverse Charge because of changes in abatement rate, composition rate, change in rate of Service tax, applicability of any new levy like KKC w.e.f June 1, 2016 etc.

  30. Question 20. Whether Cenvat Credit Of The Kkc Is Available?

    Answer :

    The Central Government vide Notification No. 28/2016-CE (N.T.) dated May 26, 2016, has amended Rule 3 of the Credit Rules to provide that:

    • Ø  A provider of output service shall be allowed to take Cenvat credit of the KKC on taxable services leviable under Section 161 of the Act;
    • Ø  Cenvat credit of any duty specified in Rule 3(1) of the Cenvat Credit Rules, 2004 (“the Credit Rules”) shall not be utilised for payment of KKC;
    • Ø  Cenvat credit in respect of KKC shall be utilised only towards payment of KKC.
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  32. Question 21. Can The Cenvat Credit Of Service Tax Be Used For Payment Of Kkc?

    Answer :

    No, Cenvat credit of Service tax cannot be used for payment of KKC. Only Cenvat credit of KKC paid on input services shall be allowed to be used for payment of the KKC on taxable services provided by a service provider.

  33. Question 22. Whether The Cenvat Credit Of Kkc Is Available To A Manufacturer?

    Answer :

    No, the Cenvat credit of KKC is not available to manufacturer. In terms of amended Rule 3 of the Credit Rules, Cenvat credit of KKC paid on input services shall be allowed to be used for payment of the KKC on taxable services provided by a service provider.

  34. Question 23. How Kkc Will Impact “make In India” And “start Up India” Campaign Of The Government?

    Answer :

    The KKC will have adverse impact on the “Make in India” and “Start up India” campaign of the Government as the manufacturers paying KKC on procurement of their input services would not be in a position to avail Cenvat credit of the same and thus would form part of their cost, leading to increase in prices to that extent. Further, there would be separate accounts, codes, records & computation, followed by corresponding peculiar Cenvat provisions, required to be maintained for KKC, going against the ease of doing business. Thus, imposition of KKC is likely to hamper “Make in India” and “Start-up India” campaign of the Modi Government.

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  36. Question 24. Does A Person Providing Both Exempted & Taxable Services And Reversing Cenvat Credit @ 7% Of Value Of Exempted Service Under Rule 6 Of The Credit Rules, Needs To Reverse The Kkc Also?

    Answer :

    Yes, since the KKC is included in the Cenvat credit chain unlike SBC, therefore, Cenvat credit have to be reversed in the similar manner as was earlier reversed in case of Education Cess and Secondary Higher Education Cess.

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  38. Question 25. Can Input Service Distributor (“isd”) Distribute The Cenvat Credit Of Kkc As Per Rule 7 Of The Credit Rules?

    Answer :

    Yes, Cenvat credit of KKC may also allowed to be distributed to Units providing taxable output services as per Rule 7 of the Credit Rules, but an appropriate amendment is required in this regard in Rule 7 of the Credit Rules.

  39. Question 26. In Which Column, Kkc And The Cenvat Credit Details Of Kkc To Be Shown In The Service Tax Return?

    Answer :

    Although the Government has prescribed the separate accounting code for KKC, but Service Tax return i.e. Form ST-3 is not amended as yet, it will be clarified to show availment and utilization of KKC separately in ST-3 in future.

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  41. Question 27. Would Rebate Be Available Of Kkc Paid On Input Services Used For Provision Of Export Of Services?

    Answer :

    The Central Government vide Notification No. 29/2016-ST dated May 26, 2016, has amended Notification No. 39/2012-ST dated June 20, 2012 (Rebate of the duty paid on excisable inputs or Service tax and cess paid on all input services used in providing service exported) to insert KKC under the definition of “service tax and cess”, to enable the provider of services to claim rebate of KKC paid on all the input services used in providing services exported in terms of Rule 6A of the Service Tax Rules.

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  43. Question 28. Would Refund Be Available Of Kkc Paid On Specified Services Used In Special Economic Zone (“sez”)?

    Answer :

    Yes, the Notification No. 30/2016-ST dated May 26, 2016 has amended the Notification No. 12/2013-ST dated July 1, 2013 (Exemption on services received by units located in a SEZ or Developer of SEZ and used for their authorised operation), which allows refund of the KKC paid on the specified services to SEZ Unit or developer, on which ab-initio exemption is admissible but not claimed and the refund amount would be calculated as under:

    Service tax distributed to SEZ Unit/ Developer as per Rule 7 of the Credit Rules*(0.5+0.5)