All about Cess – Meaning, Types, Where it comes from 24/06/2019 – Posted in: Daily News

ALL ABOUT CESS

 

For: Preliminary & Mains

Topics covered: What is Cess? Where is it come from? where it’s going? It’s uses

 

Meaning of Cess

Cess is a form of tax charged/levied over and above the base tax liability of a taxpayer. It is not a permanent source of revenue for the government, and it is discontinued when the purpose levying it is fulfilled.

  • Cess can be levied on both direct and indirect taxes.
  • A cess is usually imposed additionally when the state or the central government looks to raise funds for specific purposes.
  • For example, the government levies an education cess to generate additional revenue for funding primary, secondary, and higher education.

 

In the case of the cess levied on direct taxes, it is added to the basic tax liability of the taxpayer and is paid as a part of the total tax paid by the taxpayers themselves. In the case of the cess levied on indirect taxes, such as service tax or sales tax, or GST in India’s case, it is paid by the producer of the goods and services.

 

Tax vs. Cess

  • Cess is different from taxes such as income tax, GST, and excise duty etc as it is charged over and above the existing taxes.
  • While all taxes go to the Consolidated Fund of India (CFI), cess may initially go to the CFI but has to be used for the purpose for which it was collected.
  • If the cess collected in a particular year goes unspent, it cannot be allocated for other purposes. The amount gets carried over to the next year and can only be used for the cause it was meant for.
  • The central government does not need to share the cess with the state government either partially or in full, unlike some other taxes.
  • The procedure for introducing cess is comparatively simpler than getting the provisions done for introducing taxes, which usually means a change in the law.
  • Cess is also easier to modify and abolish.

 

Types of Cess

  1. Education Cess
  2. Health and Education Cess
  3. Swachh Bharat Cess
  4. Krishi Kalyan Cess
  5. Infrastructure Cess

 

Source: Financial Express

 

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