Krishi Kalyan Cess (KKC)
Krishi Kalyan Cess is a levy/tax imposed by the Union Government on all services, which are liable to service tax, at the rate of 0.5% for financing improvement of agriculture and welfare of farmers. ('Krishi' means 'farming' and 'Kalyan' means 'welfare' in Hindi)
A tax of 0.5% translates into a tax of 50 paisa on every one hundred rupees worth of taxable services. This cess is levied in addition to any cess or Service Tax levied at present, like, Swachh Bharat Cess.
KKC comes into effect from 1 June 2016. Input tax credit of this cess is available upon payment of this cess.
KKC has been subsumed into the Goods and Service Tax, when the latter got introduced on 1 July 2017.
In fact, Finance Bill defines KKC as a service tax on all or any of the taxable services at the rate of 0.5 percent on the value of such services for the purposes of financing and promoting initiatives to improve agriculture or for any other purpose relating thereto.
The legal provisions related to service tax including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Krishi Kalyan Cess.
The proceeds of the Krishi Kalyan Cess are first credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament, utilise the money for such specified purposes as it may consider necessary.
Krishi Kalyan Surchage
Krishi Kalyan Cess is different from the Krishi Kalyan Surcharge which is announced by the Government in the same Union Budget, 2016-17. In order to provide a stable and predictable taxation regime and reduce black money, it was announced in the budget that domestic tax payers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge (means an addition to the existing tax) at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Such declarants will have immunity from prosecution.
The Finance Minister while declaring the above provision mentioned that Surcharge levied at 7.5% of the undisclosed income will be called as Krishi Kalyan Surcharge, to be used for agriculture and rural economy.