Farm cess taxing India Inc.?

A new tax, known as ‘Krishi Kalyan Cess’ (KKC) has been introduced with effect from June 1st, 2016, the proceeds of which are intended to fund programs for the improvement of agriculture and welfare of farmers. KKC is levied at 0.5% of the value of taxable services, and is chargeable on all taxable services. It is estimated that service tax would yield the government Rs. 2,16,000 crores, whereas KKC is estimated to garner Rs. 5,000 crores. The effective rate of tax on services will be 15% (14% service tax + 0.5% Swachh Bharat Cess + 0.5% KKC). In a span of one year, the effective rate has increased from 12.36% (till 2015-2016) to 15%. GST, which is high on the government’s agenda, has indicated 17-18%.

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