Education Cess is levied under section 91 to fulfil the commitment of the Government to provide and finance universalised quality basic education

Indian Service Tax

CESS

• Education Cess is levied under section 91 to fulfil the commitment of the Government to provide and finance universalised quality basic education.

• It is at the rate of 2.

• It shall be taxable services in addition to the existing tax (i.e. S.T. presently 10%, Education Cess 2% of 10% = 0.1; total S.T. = 10.2%)

• Cess is payable on input services and output services.

• Service Tax Credit is available.

• Cess cannot be utilised for any other purpose.

• Education Cess is payable from 10/9/2004.

• The provisions of Chapter V of the Finance Act, 1994 and rules made thereunder are applicable to levy and collection of Cess
  too.

F.No. B2/8/2004-TRU

Date 1/9/2004

Education Cess on taxable services

Education cess on taxable services is imposed under section 91 read with section 95 of the Finance (No.2) Act, 2004. The cess would be 2% of the service tax levied and collected. Therefore, fully exempted taxable services would not be subjected to cess. In case of a partial exemption, say by way of abatement, the cess would be calculated on the net tax paid and not on the entire amount of tax that would have been payable, but for the exemption.