The Government of India has announced a Swachh Bharat Cess (SBC) of 0.

5% on all taxable
services that is to be levied and collected with effect from 15 November 2015. The
notification to this effect was released by the Government on 6 November 2015 vide
Notification No 21/2015-Service Tax, covering Swachh Bharat Cess, under Chapter VI
(Section 119) of the Finance Act 2015.
IMPACTThe SBC of 0.5% will be paid by all citizens who avail of any service that is taxable under
service tax. What this means is that for every Rs 100 spent in availing any taxable service, Rs
0.50 will be paid to the government as SBC. This will apply to services like a/c restaurants,
rail, road and air services, lottery services, insurance premiums and the like which means all
those availing such services will now have to pay an extra 0.5%. However, the SBC will not
be levied on services listed under the negative list or those that have been exempt from
service tax.
Firstly, it must be clarified that while the SBC is referred to as a cess, it is actually a service
tax. SBC is not applicable on the amount of service tax but on the value of taxable services.
All service providers will now have to charge the SBC as a separate and clear amount, and
this will in turn be registered in the service providers accounts under a separate heading, and
paid to the government under the specified accounting code as per notification from the
government.
The existing service tax is 14% (raised recently from 12.5% to 14%) and the SBC will be
charged additionally at 0.5%, therefore making the total service tax stand at 14.5%.
All SBC collected will be credited to the Consolidated Fund of India account and will be
utilized by the Government of India for purposes of implementing the Swachh Bharat
Abhiyan.
Why has the government introduced the Swachh Bharat Cess?
The SBC is aimed at raising additional funds to effectively implement stated goals under the
Swachh Bharat Abhiyan. When Prime Minister Modi took office in May 2014, he adopted the
Swachh Bharat Abhiyan as one of the primary goals of his government that was aimed at
improving the overall health and well-being of citizens. The mission was formally launched
on 2 October 2014.

Health and hygiene directly impacts peoples lives but have been given very little attention
towards improving personal hygiene and cleanliness in the surroundings that people live in.
The Prime Minister started an awareness on the need to maintain cleanliness and give up
open air defecation that has been a common practice in India on account of lack of toilets in
peoples homes.
This was taken up on mission mode and backed with an actionable plan to ensure that India
built 12 crore toilets in rural and urban areas, and ensure that India became free from open air
defecation by 2019. The Swachh Bharat Abhiyan has the following goals:
Totally eliminate open air defecation.
Build pit latrines in all homes of those living below poverty line, with 80% cost subsidy.
Total eradication of manual scavenging.
Recycling and processing of solid waste into energy and other by-products like fertilizer.
Improve peoples awareness for proper sanitation and on the importance of personal hygiene.
Involve people, with the help of private sector and various NGOs, to spread the need to proactively adopt and promote the goals of the Abhiyan.
To ensure that Swachh Bharat Abhiyan is able to meet its stated goals, the government has
decided to introduce the Swachh Bharat Cess for raising funds to meet mission objectives.
CHAPTER VI SWACHH BHARAT CESS 119.
(1) This Chapter shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.
(2) There shall be levied and collected in accordance with the provisions of this Chapter,
a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable
services at the rate of two per cent. on the value of such services for the purposes of
financing and promoting Swachh Bharat initiatives or for any other purpose relating
thereto.
(3) The Swachh Bharat Cess leviable under sub-section (2) shall be in addition to any
cess or service tax leviable on such taxable services under Chapter V of the Finance
Act, 1994, or under any other law for the time being in force.
(4) The proceeds of the Swachh Bharat Cess levied under sub-section (2) shall first be
credited to the Consolidated Fund of India and the Central Government may, after due

appropriation made by Parliament by law in this behalf, utilise such sums of money of
the Swachh Bharat Cess for such purposes specified in sub-section (2), as it may
consider necessary.
(5) The provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder,
including those relating to refunds and exemptions from tax, interest and imposition
of penalty shall, as far as may be, apply in relation to the levy and collection of the
Swachh Bharat Cess on taxable services, as they apply in relation to the levy and
collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or
the rules made thereunder, as the case may be.
Q.16 How would the tax (Service Tax and SBC) be calculated on services covered
under Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006.? Ans.
The tax (Service Tax and SBC) on services covered by Rule 2A, 2B or 2C of Service
Tax (Determination of Value) Rules, 2006, would be computed by multiplying the
value determined in accordance with these respective rules with [14% + 0.5%].
Therefore, effective rate of Service Tax plus SBC in case of original works and other
than original works under the works contract service would be 5.8% [(14% +
0.5%)*40%] and 10.15% [(14% + 0.5%)*70%] respectively. Similar, would be the tax
treatment for restaurant and outdoor catering services.