The government on Friday decided to impose a 0.5% cess on all taxable services to fund the Swachh Bharat programme. Called the Swachh Bharat cess, it will apply to all services liable for service tax and will be effective from November 15.

The additional cess would be over and above the 14% service tax, which is levied on all services except for a small negative list. The new cess will translate into a tax of 50 paise on every Rs 100 worth of taxable services. The implications include all services, including air travel, telephony, eating out and banking, becoming expensive.

The move may yield the government an additional Rs 400 crore during the remainder of the current fiscal, reported the Press Trust of India. In the 2015-16 Budget, finance minister Arun Jaitley had proposed to levy a Swachh Bharat cess of up to 2% "on all or certain services, if need arises".

A finance ministry statement on Friday said, "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."

Swachh Bharat is among Prime Minister Narendra Modi's flagship campaigns. It was launched in October last year with the aim of ensuring cleanliness across the country by October 2, 2019, which is the 150th birth anniversary of Mahatma Gandhi.