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DAILY NEWS ANALYSIS

  • 27 September, 2020

  • 5 Min Read

Where are the funds collected through cess parked?

Where are the funds collected through cess parked?

Context:

  • The Comptroller and Auditor General (CAG) of India, in the latest audit report of government accounts, has observed that the Union government withheld in the Consolidated Fund of India (CFI) more than ? 1.1 lakh crore out of the almost? 2.75 lakh crore collected through various cesses in 2018-19.

Issues:

  • Given that cess does not need to be a part of the divisible pool of resources, increasing the share of cess in the Union government’s tax receipts has a direct impact on fiscal devolution.

How many cesses does the government levy?

  • According to a report by Vidhi Centre for Legal Policy (August 2018) submitted to the Fifteenth Finance Commission, 42 cesses have been levied at various points in time since 1944.
  • The very first cess was levied on matches.
  • Post-Independence, the cess taxes were linked initially to the development of a particular industry, including a salt cess and a tea cess in 1953.
  • Subsequently, the introduction of a cess was motivated by the aim of ensuring labour welfare.
  • Example: iron ore mines labour welfare cess in 1961, the limestone and dolomite mines labour welfare cess of 1972 and the cine workers welfare cess introduced in 1981.
  • The introduction of the GST in 2017 led to most cesses being done away with and as of August 2018, there were only 7 cesses that continued to be levied.
  • Cess on Exports, Cess on Crude Oil, Health and Education Cess, Road and Infrastructure Cess, Building and Other Construction Workers Welfare Cess, National Calamity Contingent Duty on Tobacco and Tobacco Products and the GST Compensation Cess.
  • In February 2020, a Health Cess of 5% on imported medical devices was introduced in the Finance Bill for 2020-2021.

Source: TH


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