What is Cess

Cess is a type of tax charged/levied over and above the base tax liability of a taxpayer. A cess is usually imposed  also when the state or the central government looks to raise funds for specific purposes. For example, the government imposes an education Cess to generate extra revenue for funding primary, secondary, and higher education. Cess is certainly not a permanent source of revenue for the government, and it is ended when the purpose of levying it is fulfilled. It can be levied on both indirect and direct taxes.

The government can impose cess for purposes like disaster relief, generating funds for cleaning rivers, etc.  For example, after Kerala floods in the year 2018, the state government imposed a 1% disaster cess on GST and became the first state to make it happen. In different cases, the central government might impose education cess, or a health cess, or a sanitation cess. All these duties are generally imposed as a percentage of the taxpayer’s basic tax liability. Under the GST (Goods and Services Tax) system, certain transgression goods and luxury items also attract  a cess.

 The government levies different cesses on services it provides to the public. Some of them are as follows:

Education cess: Collected by the government to provide the mandatory free standard primary education to all citizens.

Health cess: Proposed in 2018 by former finance minister Arun Jaitley to meet the health requirements of below-poverty-line families.  

Road cess or fuel cess: For maintenance of roads and infrastructure.

 Clean energy cess: Introduced in 2010, it is a carbon tax on the production and import of coal, lignite and peat, operating on the “polluter pays” principle.

 Krishi Kalyan cess: It was introduced in 2016 to provide additional support to farmers for agricultural activities.

 Swachh Bharat cess: Introduced in 2014 with the objective of delivering a clean India, it is levied at 0.5 per cent on all taxable services to fund Swachh Bharat initiatives.