As we all know, the Swachh Bharat Cess (SBC) is being levied by the Central Government @ 0.5 percent on taxable services. Initially, there was no clarity on the availability of Cenvat Credit under the Cenvat Credit Rules, 2004 or refund/rebate thereof in case of export of goods/services. The Central Board of Excise and Customs vide Frequently Asked Questions issued on 14.11.2015 on SBC, had specifically provided that because SBC is not integrated in the Cenvat credit chain, its credit is not admissible. The relevant text is extracted as under:
“Q.14 Whether Cenvat Credit of the SBC is available?
Ans. SBC is not integrated in the Cenvat Credit Chain. Therefore, credit of SBC cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax”
In this regard, the Central Government has issued various notifications under the Central Excise and Service Tax with respect to providing the benefit of refund/rebate to SBC and the input service used beyond the factory for export of goods. We have attempted to provide you with the gist of such notifications and impact thereof. Please refer the below table for better clarity of the notifications issued so far in the context of SBC:
| Notification No. and date | Referred any earlier Notification/Rules, if any | Relevant text of the earlier Notification | Relevant text of the present notification | Remarks |
| Notification No. 02/2016- Central Excise (N.T) dated 03.02.2016 | Cenvat Credit Rules, 2004 | Not required | In the said rules, in rule 3, in sub-rule (4), after the sixth proviso, the following proviso shall be inserted, namely:
“Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Swachh Bharat Cess leviable under sub-section (2) of section 119 of the Finance Act, 2015 (20 of 2015):” |
The amended Rules make clear that CENVAT Credit taken on various duties mentioned under Rule 3(1) of CC Rules shall not be used for payment of SBC. |
| Notification No. 01/2016- Service Tax dated 03.02.2016 | Notification No. 41/2012- Service Tax dated 29.06.2012 (providing refunds on specified services to the exporter of goods) | (a) the rebate shall be granted by way of refund of service tax paid on the specified services.
Explanation. – For the purposes of this notification,- (A) “specified services” means- (i) in the case of excisable goods, taxable services that have been used beyond the place of removal, for the export of said goods; (ii) in the case of goods other than (i) above, taxable services used for the export of said goods; but shall not include any service mentioned in sub-clauses (A), (B), (BA) and (C) of clause (l) of rule (2) of the CENVAT Credit Rules, 2004; (B) “place of removal” shall have the meaning assigned to it in section 4 of the Central Excise Act,1944(1 of 1944); |
in the Explanation,
(I) In clause (A), for sub clause (i), the following sub clause shall be substituted, namely: (i) in the case of excisable goods, taxable services that have been used beyond factory or any other place or premises of production or manufacture of the said goods, for their export; (II) clause (B) shall be omitted; |
The said Notification clearly provides that rebate of service tax on services beyond the factory or any other place/premise of production/manufacture of goods for their export.
In view of the aforesaid amendment, the definition of ‘place of removal’ defined under Section 4 of the Central Excise Act, has also been omitted from the said Notification (41/2012). |
| Notification No. 02/2016-Service Tax dated 03.02.2016 | Notification No. 12/2013- Service Tax dated 01.07.2013 (Regarding exemption on services provided to SEZ authorised operations) | (III) The refund of service tax on (i) the specified services that are not exclusively used for authorised operation, or (ii) the specified services on which ab-initio exemption is admissible but not claimed, shall be allowed subject to the following procedure and conditions, namely:-
(a) the service tax paid on the specified services that are common to the authorised operation in an SEZ and the operation in domestic tariff area [DTA unit(s)] shall be distributed amongst the SEZ Unit or the Developer and the DTA unit (s) in the manner as prescribed in rule 7 of the Cenvat Credit Rules. For the purpose of distribution, the turnover of the SEZ Unit or the Developer shall be taken as the turnover of authorised operation during the relevant period. (b) the SEZ Unit or the Developer shall be entitled to refund of the service tax paid on (i) the specified services on which ab-initio exemption is admissible but not claimed, and (ii) the amount distributed to it in terms of clause (a). |
In the said notification, in paragraph 3, in subparagraph (III), after clause (b), the following clause shall be inserted, namely:”
(ba) the SEZ Unit or the Developer shall be entitled to refund of the Swachh Bharat Cess paid on the specified services on which ab-initio exemption is admissible but not claimed; and ii. the refund of amount as determined by multiplying total service tax distributed to it in terms of clause (a) by effective rate of Swachh Bharat Cess and dividing the product by rate of service tax specified in section 66B of the Finance Act, 1994.” . |
This Notification enables the SEZ Unit or the Developer for refund of the SBC paid on the specified services on which ab-initio exemption is
admissible but not claimed.
It further provides that the refund of amount distributed to the SEZ Unit or the Developer in the manner as prescribed in Rule 7 of the Credit Rules, will be determined by multiplying total Service tax distributed to the SEZ Unit or the Developer in the manner as prescribed in Rule 7 of the CC Rules by effective rate SBC and dividing the product by rate of Service tax specified in Section 66B of the Finance Act, 1994. |
| Notification No. 03/2016-Service Tax dated 03.02.2016 | Notification No. 39/2012-Service Tax dated 20.06.2012 (Notification under Rule 6A of Service Tax Rules) | Not required | In the said notification, in Explanation 1, after clause (c), the following clause shall be inserted, namely:
(d) Swachh Bharat Cess as levied under subsection (2) of section 119 of the Finance Act, 2015 (20 of 2015) |
This Notification enables the provider of the service to claim rebate of SBC paid on all input services used in providing services exported in terms of Rule 6A of the Service Tax Rules, 1994. |
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