Krishi Kalyan Cess (KKC) becomes applicable from June 1, 2016. A
levy to collect funds for development of agriculture, but the
legislative amendment will now open a Pandora's Box full of litigation.
It would be wise and in the interest of businesses and 'make in India'
campaign that Government clarifies the stand immediately. The issues are
two fold:
1. The amendment to Point of Taxation Rules now cover any new levy of tax or cess. KKC comes under this. The amended rules now provide that the new levy will be applicable unless the payment has been received prior to June 1, 2016 and the invoice also raised, or if the payment is received prior to June 1, 2016 and invoice raised within 14 days of the new levy, viz. June 14, 2016. The amendment to the POT Rules is applicable from May 14, 2016, though KKC is applicable from June 1, 2016.
Now the complexity arises with respect to invoices raised and outstanding either as at May 14, 2016 or as at May 31, 2016. Will KKC apply on these ? The plain reading of the amendments would mean that KKC will apply on all outstanding invoices as at May 31, 2016. A deeper analysis would reveal that KKC will only apply on invoices raised for services rendered from May 14, 2016 and outstanding as on May 31, 2016. So, when the payment is received against such invoices, 0.5% of KKC will have to be borne by the service provider from its own pocket. And we call it a destination based tax ? Is this in line with established principles of jurisprudence and various court judgements that a new levy cannot be retrospective ?
And to top the confusion, this interpretation is applicable only to forward charge and not to reverse charge mechanism. Confusion compounded, one would say.
2. The second issue is that the credit of KKC will only be applicable for liability of KKC. But, wait, this is not the end. The credit will only be available to service providers. Manufacturing companies not rendering any service will have to take KKC as a cost on their production line. Gross injustice and contradiction to 'make in India'.
Will someone wake up and bring in clarification/amendment ASAP ???
1. The amendment to Point of Taxation Rules now cover any new levy of tax or cess. KKC comes under this. The amended rules now provide that the new levy will be applicable unless the payment has been received prior to June 1, 2016 and the invoice also raised, or if the payment is received prior to June 1, 2016 and invoice raised within 14 days of the new levy, viz. June 14, 2016. The amendment to the POT Rules is applicable from May 14, 2016, though KKC is applicable from June 1, 2016.
Now the complexity arises with respect to invoices raised and outstanding either as at May 14, 2016 or as at May 31, 2016. Will KKC apply on these ? The plain reading of the amendments would mean that KKC will apply on all outstanding invoices as at May 31, 2016. A deeper analysis would reveal that KKC will only apply on invoices raised for services rendered from May 14, 2016 and outstanding as on May 31, 2016. So, when the payment is received against such invoices, 0.5% of KKC will have to be borne by the service provider from its own pocket. And we call it a destination based tax ? Is this in line with established principles of jurisprudence and various court judgements that a new levy cannot be retrospective ?
And to top the confusion, this interpretation is applicable only to forward charge and not to reverse charge mechanism. Confusion compounded, one would say.
2. The second issue is that the credit of KKC will only be applicable for liability of KKC. But, wait, this is not the end. The credit will only be available to service providers. Manufacturing companies not rendering any service will have to take KKC as a cost on their production line. Gross injustice and contradiction to 'make in India'.
Will someone wake up and bring in clarification/amendment ASAP ???
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