Topics Covered: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
What is a cess?
It is a form of tax levied or collected by the government for the development or welfare of a particular service or sector.
- It is charged over and above direct and indirect taxes.
- Cess collected for a particular purpose cannot be used for or diverted to other purposes.
- It is not a permanent source of revenue for the government, and it is discontinued when the purpose levying it is fulfilled.
Examples:
Education Cess, Swachh Bharat Cess, Krishi Kalyan Cess etc.
What is the difference between tax and cess? What is cess tax?
- 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.
Why in News?
The Centre retained in the Consolidated Fund of India (CFI) more than ₹1.1 lakh crore out of the almost ₹2.75 lakh crore collected in 2018-19 through various cesses, instead of transferring the receipts to the specified Reserve Funds that Parliament had approved for such levies, the Comptroller and Auditor General (CAG) of India observed in a report.
Key Points:
- ₹1,24,399 crore collected as cess on crude oil over the last decade had not been transferred to the designated Reserve Fund — the Oil Industry Development Board.
- The Goods and Services Tax (GST) Compensation Cess, which has become a bone of contention between the States and the Centre, was also ‘short-credited’ to the relevant reserve fund to the extent of ₹40,806 crore in 2018-19.
InstaLinks:
Prelims Link:
- What is a cess?
- Cess vs Surcharge?
- What is Consolidated Fund of India?
- What is Contingency Fund of India?
- What is a public account?
Mains Link:
What are Cess and Surcharge? Why they are imposed? Discuss their significance.
Sources: the Hindu.
