Government sources say the new tax on the block will be levied as a service tax on all or any taxable service.
Come June 1, be ready to pay a new service tax on any of the taxable services. The Krishi Kalyan Cess announced by Finance Minister Arun Jaitley in the Union Budget will come into play from next month.
Customers who have insurance or unit linked policies have started receiving intimation regarding the new cess over the last few days with different instruments facing different levels of cess.
The government says that the cess is to finance and promote initiatives to improve the condition of the farm sector. The Krishi Kalyan Cess will be in addition to any cess or service tax.
Government sources say the new tax on the block will be levied as a service tax on all or any taxable service.
The new levy will raise the total service tax rate by 0.5 per cent. That is from 14.5 per cent which includes Swachh Bharat Cess to 15 per cent for every tax payer. The Finance Minister in his last Budget had said that the credit of the new cess paid on input services shall be allowed to be utilised only against the farm cess on output services.
Mr Jaitley since June 1 last year hiked service tax from 12.36 per cent to 14 per cent. Then came the Swachh Bharat Cess at 0.5 per cent from November 15 last year. Now, with the Krishi Kalyan Cess the total service tax stands at 15 per cent.
A Finance Ministry official said, "The Finance Minister may be taking small steps but it's increasingly evident that the rate is being edged closer to the anticipated level of GST at around 18 per cent."
With the government failing to create a consensus on the GST Bill, there may soon be a situation where the tax levels may match the GST mark but the ease of taxation offered by the one tax for all India may be missing.