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States asked to use cess fund to help construction workers

Topics Covered: Government Budgeting.

States asked to use cess fund to help construction workers

What to study?

For Prelims: What is Cess? Overview of BOCW Act.

For Mains: Significance of the move.

Context: The union government has asked all states to dip into the  ₹52,000 crore Construction Cess fund to give financial and allied benefits to the construction workers through direct benefit transfer (DBT).

  • The central advise comes as Corona outbreak spreads and the country is facing an unprecedented lockdown hampering livelihood of millions of informal workers.
  • The advisory comes under Section 60 of the Building and Other Construction Workers (BOCW) Act, 1996.
  • The amount to be granted to construction workers may be decided by the respective state governments and Union territories.

 

What is a cess?

  • A cess is levied on the tax payable and not on the taxable income. In a sense, for the taxpayer, it is equivalent to a surcharge on tax.
  • A cess can be levied on both direct and indirect taxes. The revenue obtained from income tax, corporation tax, and indirect taxes can be allocated for various purposes.
  • The proceeds of all taxes and cesses are credited in the Consolidated Fund of India (CFI), an account of the Government of India.

Difference between tax and cess?

Unlike a tax, a cess is levied to meet a specific purpose; its proceeds cannot be spent on any kind of government expenditure. While the tax proceeds are shared with the States and Union Territories according to the guidelines by the Finance Commission, the cess proceeds need not be shared with them.

Recent examples of cess are: infrastructure cess on motor vehicles, clean environment cess, Krishi Kalyan cess (for the improvement of agriculture and welfare of farmers), and education cess.

Insta Link:

Prelims Link:

  1. Difference between Cess and Tax.
  2. Who can levy and collect cess?
  3. How is it shared?
  4. What is a public account?
  5. Who governs is CFI?

Mains Link:

What is Cess? How is it different from a surcharge? Discuss.

Sources: pib.