Current Affairs Question - 06 March 2021

Explanation :

Context: The share of cess and surcharge in the gross tax revenue (GTR) of the Centre has almost doubled to 19.9% in 2020-21 from 10.4% in 2011-12.The 15^thFinance Commission has recommended a higher grant-in-aid and lower tax devolution to the States.

About 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.
• Currently, the cess and surcharge collected by the Centre are not part of the tax devolution.
• Examples: Education Cess, Swachh Bharat Cess, Krishi Kalyan Cess etc.

About Surcharge

• Surcharge is an additional charge or tax levied on an existing tax.
• Unlike a cess, which is meant to raise revenue for a temporary need, surcharge is usually permanent in nature.
• It is levied as a percentage on the income tax payable as per normal rates. In case no tax is due for a financial year, then no surcharge is levied.
• The revenue earned via surcharge is solely retained by the Centre and, unlike other tax revenues, is not shared with States.
• Collections from surcharge flow into the Consolidated Fund of India.