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 its rate, but it can be revised from time to time. Generally, the proceeds are used for specific purposes, such as financing social welfare schemes or developing specific sectors of the economy. 

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

Difference between tax and Cess 

A tax is a compulsory contribution to state revenue levied by the government on workers’ income, goods, or services. It is a levy 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 they are earmarked. 

FAQs (Frequently Asked Questions)

The Government of India imposes it on income tax to raise funds for specific purposes.

It will compensate the states for any revenue loss on account of implementation of GST.

Generally, it is expected to be levied when there is a need to meet specific expenditure for public welfare and discontinued once the government gets enough funds for that purpose.

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