Krishi Kalyan Cess: Burden to pockets or relief to farmers?

Restaurant and phone bills, rail and flight tickets, visit to beauty parlours, insurance, DTH, cinemas are set to become more expensive from 1 June. With the 0.5% Krishi Kalyan Cess, all taxable services will be charged an effective service tax of 15%, in addition to the VAT and service charges that customers pay.

The government with this move proposes to collect Rs 5,000 crore during the remaining 10 months of the current fiscal, reported The Financial Express.

"I propose to impose a cess called Krishi Kalyan Cess at 0.5 per cent on all taxable services, the proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers," Jaitley had said in his budget speech.

KKC to be levied on all taxable services is aimed at financing and promoting initiatives to improve agriculture. The Central Board of Excise and Customs (CBEC) has notified that the Cess will come into force from 1 June. The service tax is levied on all services, expect a small negative list and 47 exempted services.

"The levy of KKC will add extra burden on the pockets of service recipient. The levy has already been raised from 12.36 % to 15 % within a span of one year only and will contribute to inflationary pressures," Amit Maheshwari, Partner, Ashok Maheshwary & Associates told PTI.

Last year, the government had imposed Swachh Bharat Cess of 0.5 % on Service Tax.