The government has recently introduced the Krishi Kalyan Cess to fund programmes for the welfare of farmers. On June 1, 2015 Service Tax rates were hiked from 12.36% to 14%. The Swachha Bharat Cess was also introduced at the rate of 0.5% from 15th November last year. With the introduction of Krishi Kalyan Cess, the total Service Tax to be paid will be 15%.

Let us understand more about Cess in general, and about the Krishi Kalyan Cess.

What is a Cess?

A cess is a tax that is levied by any government for raising funds to achieve specific purposes. For example, the Education Cess and the Secondary and Higher Education Cess is meant to collect funds for primary and higher and secondary education.

As per the Article 270 of our Constitution, Cess is imposed by the Parliament for earmarked purposes and the same is not shared with state governments. If the collected money is not spent, then it has to be carried forward to the next year.

Read more about the Goods and Services Tax.

What is the Krishi Kalyan Cess?

KKC is a cess is a Service Tax which will be levied and collected under the provision of Chapter VI of the Finance Act, 2015 on all the Taxable Services. The cess will be charged at the rate of 0.5% of the value of the Taxable Service.

What is the reason behind introducing the KKC?

As per the government, the objective of introducing this cess is to collect funds for improving the life of farmers and enhance and finance the agricultural facilities.

When is this new Cess going to be applicable?

The krishi kalyan cess has come in to effect from June 1st and a person availing any services on or after 1st June’ 2016, or making any payment towards services post 1st June’ 2016 has to make additional 0.5% payment towards Krishi Kalyan Cess.

How will it impact your life?

It will increase your expense on services at restaurants, movie theatres, shopping, visits to a parlour, air travel, insurance premiums, cable/DTH services, healthcare and all the other services.

The reason behind the KKC could be the government’s move to ensure that we absorb taxes in smaller doses i.e. installments as compared to a sudden rise.

The proceeds from the cess to farmers’ benefit could be beneficial in the long run. The Krishi Kalyan Cess can create a positive effect but only after making sure that the benefit reaches to the farmers.

More about the Experts:

Rishabh Parakh

Rishabh is a Chartered Accountant and a founder Director cum Chief Gardener of Money Plant Consulting, A leading tax and investment service provider He also writes for several leading publications in India.

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