The 0.5% Swachh Bharat cess which is slated to bring in around 10,000 crores a year for the government might seem to be a small change, but its effects are far-reaching. Making a PAN card, travelling via train or even going to a restaurant will all cost more.
The yearly Budgets have become a licensed opportunity to fiddle with the tax laws and rates. It was in the Budget 2015-16 that Finance Minister Arun Jaitley proposed a 2% Swachh Bharat cess “on all or certain services, if the need arises”, but no date was set as such at the time. Since the initial cess proposed was 2%, the question remains as to would the remaining cess be levied later?
Many might support this move viewing it as a measure to uplift the filthy face of the country which has become a point of public shame. However, in a country where fund diversion is only too common, how can we, the common citizen taxpayers of the country, be sure that the money won’t go into Modi’s image-making campaign but truly in cleaning the nation? After all the Swachh Bharat campaign was an initiative towards a better political mileage for the Prime Minister and the BJP.
Within the remaining months of this fiscal the Swachh Bharat cess is supposed to yield around Rs 3,800 crore. But funds usually don’t reach where it’s most needed—the municipality and the panchayat levels in general.
A notification regarding the cess was issued by the CBEC on November 6 and it was effective from November 15, following which, all taxable services face a hike from 14% to 14.5% in service tax rates. Being Diwali week, many were on holiday during this period and most companies couldn’t make the necessary changes at such short notice.
The 2015-16 Budget held no benefits for the average salary earning citizens but promised to cut corporate taxes from 30% to 25% in four years. Modi has even promised foreign firms of tax exemption. Is it not the duty of the corporates to contribute to a cleaner country? Why is it that only individuals are burdened on this count?
Moreover, it was only on November 11 that many of the issues were clarified by CBEC through FAQs, such as—services with alternate tax rates will also have alternate cess rates, and that no Cenvat credit would be available on this Swachh Bharat Cess. Without this input credit, the effective rate of the tax is marginally more than the proposed 14.5% service tax on paper.
As per initial estimates, the Swachh Bharat project needs a funding of ₹62,009 crore. 23 per cent of this (₹14,623 crore) would be paid by the Government of India while the States would pay ₹4,874 crore (25 per cent of the government paid amount).
The remaining amount is expected to come from the Swachh Bharat Kosh, Private Sector Participation, State governments/ULB resources, innovative revenue streams, user charges, and other methods such as external assistance and CSR. User charges are usually only used for maintenance expenses, and borrowing money for a social cause is never a good idea. The government would do good to think of alternative methods, such as a deduction from every individual under the Income Tax Act.
A cleanliness drive has to start at the grassroots level and on a regular basis to address the country’s filth problem. A civic sense needs to be developed in each and every citizen for this project to turn into a reality. The cess described by the Finance Ministry as “not another tax, but a step towards involving each and every citizen in making a contribution to Swachh Bharat” is definitely not the way to achieve this end.