PANAJI
Eating out, mobile phone usage and air and rail travel will soon become expensive with the new Krishi Kalyan Cess (KKC) of 0.5 per cent on taxable services, announced in the budget by Union Finance Minister, Arun Jaitley, coming into force from June 1.
With this, the basic service tax rate of 14 per cent plus Swachh Bharat Cess (SBC) of 0.5 per cent and KKC of another 0.5 per cent will finally push the overall service tax rate to 15 per cent.
Experts agree that this will increase the price of services and the impact will be felt more in Goa since the State heavily relies on tourism, which is a service industry.
Sandip Bhandare, a chartered accountant, said, "Any increase in service tax is going to lead to inflation". Another chartered accountant, Ashish Prabhu Verlekar, feels "the good part with KKC is you can get credit for it, while you cannot get credit for SBC. However, the downside is, it will make compliance more difficult because you will have to segregate records and show KKC separately to get credit".
With KKC, you can set-off taxes paid on the value of inputs of your service from the tax you are paying for selling the service. However, availing this benefit will be a challenge from record-keeping viewpoint.
People in service businesses in Goa confirmed that 0.5% additional cess from June 1 will pose other challenges too. Lloyd Braganza, owner, House of Lloyds restaurant in Saipem, said, “Everything is getting expensive and if you further increase price on account of this cess now, customers aren’t going to like it. I’ve seen people aren’t willing to pay service charge either”.
A restaurant bill has several components to it with a value added tax, a service tax, a SCB and now a KKC. In addition to that, a number of upmarket restaurants even levy a service charge, which is not mandated by law and which is for serving the customers.
In other words, it is a tip in-built in the bill. With a further cess of 0.5% from June 1, customers are going to be more wary of all the taxes they are paying.
Prabhu Verlekar informed that KKC will be levied even when the bill was raised before June 1 but wasn’t paid till June 1. This will add to complexity. As a customer of a service, you will have to pay additional 0.5% KKC even when the original bill raised didn’t include it.
