Cess | Meaning and Definition

What is Cess? 

A cess is a tax levied by the government of India on certain goods and services. The government generally fixes the cess rate, but it can be revised from time to time. Generally, the proceeds from cess are used for specific purposes, such as financing social welfare schemes or developing specific sectors of the economy. 

A cess is different from other types of taxes in that it is not levied on income or profits. Instead, it is a tax applied to a particular good or service. For instance, the Swachh Bharat Cess is levied on all services provided in India, and it goes towards funding the Swachh Bharat Abhiyan (Clean India Mission). 

Types of Cess in India 

There are various types of cess in India levied by the government of India for specific purposes: 

  •   Education Cess
  •   Swachh Bharat Cess
  •   Health and Education Cess
  •   Krishi Kalyan Cess
  •   Infrastructure Cess
  •   Cess on Exports
  •   Road and Infrastructure Cess
  •   The GST Compensation Cess 

Difference between tax and cess 

A tax is a compulsory contribution to state revenue levied by the government on workers’ income, goods, or services. A cess is a levy imposed by the government on certain items for specific purposes. It is an indirect tax collected by the producer or merchant and passed on to the ultimate consumers. 

The main difference between tax and cess is that a tax is levied universally while a cess selectively on certain items. For example, income tax and corporation tax are levied on all sources of income, while tobacco cess is imposed only on tobacco products. Another difference is that taxes are used to finance public goods and services such as education, health care, and infrastructure, whereas cesses are earmarked. 

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