Cess

The Comptroller and Auditor General (CAG) has reported that, as of 2023-24, the Central Government has failed to transfer ₹3.69 lakh crore worth of cess collections to the relevant funds for which the cess was implemented.

About Cess

A cess is a form of additional tax levied by the government for a specific purpose. It's different from regular taxes like excise duties or income tax, as it is a supplementary charge added on top of existing taxes.

Key Points about Cess:

• Purpose: Cess is implemented for specific objectives, such as cleanliness, education, or other welfare activities, until the government accumulates sufficient funds for that purpose.

  • Example: The Swachh Bharat cess, introduced for cleanliness initiatives across India, is a well-known case.

• Tax on Tax: A cess is an extra tax, meaning it is applied in addition to the standard taxes that individuals and businesses already pay. For example, someone who pays income tax may also pay a cess for a specified purpose.

Revenue Allocation from Cess

• Unlike general tax revenues, which are pooled into the Consolidated Fund of India (CFI) and used for any government expenditure, the proceeds from cess must be appropriated by Parliament and spent only on the designated purposes for which the cess was levied.

• There are some nuances in how the funds are utilized:

  • While tax revenues are typically shared with state governments, cess revenues may not be shared with them, which limits their direct benefit from such funds.

Key Difference Between Cess and Taxes

1. Purpose: Taxes fund general government expenses, while cess is aimed at funding a specific purpose.

2. Revenue Usage: While tax revenue goes to the Consolidated Fund of India for general use, cess revenue is meant to be used only for the specific goal it was levied for, after parliamentary approval.

3. Distribution: Taxes are shared between the Center and States, but cess may not necessarily be shared.

Concerns Over the Cess Collections

The failure to transfer cess funds has raised concerns regarding government transparency and accountability in fund management. The ₹3.69 lakh crore collected has not been appropriately allocated to the specified projects, which may have serious implications for the intended development programs.

Conclusion

While cess is a critical tool for funding specific initiatives, the non-transfer of funds to the relevant schemes highlights the need for more effective financial management. It also calls into question the government’s commitment to the intended purposes behind these additional taxes.