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Cess: Meaning and Types in India

CESS is tax on tax and usually levied for the specific purposes. Once its purpose is solved they are stopped. Unlike the other taxes that have to be shared with other Indian states, the centre keeps the entire amount raised from the Cess. The collection through the CESS is kept in the Consolidated Fund of India. As of now there are 6 types of Cess imposed in India.
Feb 20, 2019 17:22 IST
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Tax Structure in India
Tax Structure in India

What is Cess?

CESS is tax on tax and usually levied for the specific purposes. Once its purpose is solved they are stopped. Unlike the other taxes that have to be shared with other Indian states, the centre keeps the entire amount raised from the Cess.

However, a cess is levied to develop only a particular service or sector, which is usually social welfare scheme.

Cess fund is to be kept in the Consolidated Fund of India, before being transferred to the dedicated accounts.

Types of Cess are;

As of now some cess are being subsumed under the GST with effect from 1 July 2017. Name of subsumed cess are;

1. Krishi Kalyan Cess

2. Swacch Bharat Cess

3. Clean energy cess

4. Cess on Tea, sugar and jute etc.

Currently there are 6 cess continued to be levied by the centre government namely;

1. Primary Education Cess

2.  Secondary Education Cess

3. Cess on Crude Petroleum Oil

4. Road Cess

5. NCCD on tobacco and tobacco products

6. Education cess on imported goods

It is worth to mention that the rate of cess on most goods & services is 4%.

What is GST Bill and how will it affect the life of a Common Man?

Revenue collection from the Cess;

According to the latest report released by the CAG; the central government has collected Rs. 2,14,050  through cess in 2017-18. In the financial year 2016-17 the Ministry of Finance said that it collected Rs. 2,35,307 cr. from the cess.

Irregularities in the use of Cess fund;

As per the rule the cess amount is to be spent on the specific purposes for which it is collected. But the problem occurs when the collected amount is not spent on the specific purposes.

A parliamentary panel said that against a total amount of Rs. 86440 cr cess was collected till the end of the FY 2017-18 only Rs.29645 cr was transferred to the fund. It means the cess fund is beling used for other purposes.

For example; National Clean Energy Fund was created out of cess on coal produced in the country and imported. But this cess is used in the centre’s Namami Gange, Green India Mission and the National Solar Mission. During the period 2015-16-2017-18; Rs. 19013 cr was allocated for these programmes.

Difference from Surcharge:

Surcharge is a charge on any tax, charged on the tax already paid. Hence surcharge is an additional charge or tax. The main surcharges are imposed on personal income tax (on high income slabs and on super rich) and on corporate income tax.

Example; the government levies surcharge on income tax, which is levied at 10% of income tax, on those tax payers whose total taxable income is between Rs.50 to 1 cr and surcharge is 15% if income is above Rs.1 crore.

So I hope that from the above explanation the readers must got the clear picture of cess and surcharge.


History of Taxation in India

Taxation in India: An Overview