SMEs Gearing Up For New Krishi Kalyan Tax | SupportBiz

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SMEs Gearing Up For New Krishi Kalyan Tax

 
SMEs and MSMEs will have to pay 15% on transactions related to any of the taxable services.
Following the Clean India tax, the new tax for the welfare of the farmers (Krishi Kalyan) comes effective today. All the SMEs and MSMEs are gearing up for the new tax structure.
 
It will apply to all taxable services, and CENVAT (central value added tax) credit will be available to service providers on the cess paid on input services, the Finance Ministry has said. However, the input credit on the Krishi Kalyan Cess can only be used for discharge of the KKC liability. the objective of the KKC is to gather funds for improving the agricultural activities in order to lend aid to farmers eventually and in a country where the occupation of farming is paramount. The KKC is an added cess on any service tax leviable on taxable services under chapter V of Finance Act. The Krishi Kalyan cess at 0.5% has been introduced by the Union Government for the purpose of financing and promoting initiatives to improve agriculture thus revising the new rate of service tax to 15%.
 
So, from June 1, SMEs and MSMEs will have to pay 15% on transactions related to any of the taxable services.  Air travel, rail travel, mobile bills, eating out in restaurants, hotel bills, movie tickets, insurance policy, health check-ups, private tuition and coaching centres, banking services will be charged.
 
All the taxation software companies are also modifying their taxation formula. In Tally. ERP 9, the Krishi Kalyan cess is auto calculated in transactions, be it regular sale, reverse charge, sale of service with abatement or sale value which is inclusive of tax. The printed invoice will also display the cess value. Additionally, provision has been made to allow adjustment of Krishi Kalyan cess credit against Krishi Kalyan cess liability, and to account for interest and penalty on the cess.