Current Affairs Question - 25 September 2020

National Banking & Finance

Cess

Consider the following statements with reference to Cess:

A cess is a form of tax usually imposed additionally when the state or the central government looks to raise funds for specific purposes.
If the cess collected in a particular year goes unspent, it may be allocated for other purposes.

Choose the correct answer from the codes given below:

View Explanation

Explanation :

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

Difference between Tax and 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.

Types of Cess in India

Education Cess: Education cess was introduced to finance and provide standard quality education to poor people.
Health and Education Cess: Proposed in Budget 2018 to meet the education and health needs of rural and rural and Below Poverty Line (BPL) families.
Swachh Bharat Cess: Introduced in 2015, a 0.5% Swachh Bharat cess was imposed to fund national campaign for clearing the roads, streets and the infrastructure of India.
KrishiKalyanCess: This cess was aimed at developing the agricultural economy, and was collected at the rate of 0.5%.
Infrastructure Cess: Announced in Union Budget 2016, this cess was charged on the production of vehicles.

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