All services, including air travel, telephony, eating out and banking will become expensive from November 15 as the government today decided to impose a 0.5 per cent cess on all taxable services to fund the Swachh Bharat programme.
The additional cess would be over and above the 14 per cent Service Tax rate which is already being levied and may yield the government an additional about Rs 400 crore during the remainder of the current fiscal.
"The government has decided to impose, with effect from November 15, 2015, a Swachh Bharat Cess at the rate of 0.5 per cent on all services, which are presently liable to service tax," a Finance Ministry statement said.
Finance Minister Arun Jaitley had in Budget 2015-16 proposed to levy a Swachh Bharat cess of up to 2 per cent "on all or certain services, if need arises".
The decision to impose 0.5 per cent cess will translate into a tax of 50 paise only on every Rs 100 worth of taxable services.
"Swachh Bharat cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives," the statement added.
Swachh Bharat is among the major initiatives of the Modi government, which has embarked on a major drive to ensure cleanliness across the country.
In his Budget speech on February 28, Jaitley had said: "This cess will be effective from a date to be notified. Resources generated from this cess will be utilised for financing and promoting initiatives towards Swachh Bharat".
The government had in Budget 2015-16 estimated to collect over Rs 2.09 lakh crore from service tax. The Rs 400 crore collection from the cess would be over and above that.