Krishi Kalyan Cess (KKC), which will be applicable from 1st June 2016 onwards at the rate of 0.5% of the value of taxable services.
Please note that as per the explanation inserted under Rule 5 of Point of Taxation Rules, 2011 (POTR), KKC would not be applicable only in the following two scenarios:
· When invoice is raised and payment is received prior to 1st June 2016.
· When payment is received prior to 1st June 2016 and invoice is issued within 14 days (i.e. up to 14th June 2016).
As of now there is no clarity provided by Government on applicability of KKC for services provided and invoice raised before 1st June 2016 but amount received after 1st June 2016. However, our discussions with TRU / Government indicates that at present the Government may not clarify the position as they believe that as per Rule 5 of POTR, the amount is payable (though on a standalone basis, the charging section 66B read with Section 67A does not impose the said levy). In any case the Government is of the view that the assessees are able to recover these amount from customers/ clients.
Hence, there can be possibility that KKC would become payable on payments received after 31st May even though services provided and invoice raised before 1st June 2016. We are obtaining legal opinion in this regard. If KKC become payable by you and recovered from you, then you can recover the same from clients. Accordingly, you would raise supplementary invoice to the effect & send it to client directly.
However in order to avoid any such dispute/ litigation, you should advice the clients to make payment of the arrears by 31st May 2016, to save the levy of Krishi Kalyan Cess, if applicable, at a later stage.