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Understanding Cess in India: Types, Purposes, and Key Insights

In India, "cess" is a form of tax that is levied for a specific purpose. Here’s an overview of different types of cess, their purposes, and other important details: 1. Education Cess Purpose: To fund primary and secondary education. Details: Originally levied at 2% on the tax payable. Education Cess on Income Tax is charged on the amount of income-tax computed, inclusive of surcharge. It is also known as the 'Primary Education Cess'. 2. Secondary and Higher Education Cess Purpose: To finance secondary and higher education initiatives. Details: Levied at 1% on the tax payable, including surcharge and education cess. This cess is specifically aimed at improving the infrastructure and quality of secondary and higher education. 3. Health and Education Cess Purpose: To support health and education schemes. Details: Introduced in the Budget 2018, replacing the earlier Education Cess and Secondary and Higher Education Cess. Levied at 4% on the income tax, including surcharge. This cess is used for funding healthcare and educational programs. 4. Swachh Bharat Cess Purpose: To fund Swachh Bharat (Clean India) initiatives. Details: Introduced in November 2015. Levied at 0.5% on all taxable services. The collected funds are used to achieve the goals of the Swachh Bharat Abhiyan, including sanitation and cleanliness drives. 5. Krishi Kalyan Cess Purpose: To improve agricultural development. Details: Introduced in June 2016. Levied at 0.5% on all taxable services. The funds collected are used to finance initiatives aimed at the welfare of farmers and agricultural activities. 6. Infrastructure Cess Purpose: To develop and maintain infrastructure. Details: Levied on the production of certain goods like motor vehicles. The rate varies depending on the type of vehicle. Funds are used for infrastructure projects such as road construction and maintenance. 7. Clean Energy Cess (Now known as Clean Environment Cess) Purpose: To promote clean energy initiatives. Details: Initially levied on coal, lignite, and peat at a rate of Rs. 50 per tonne, and increased over time. Renamed to Clean Environment Cess in the Budget 2016. Funds are utilized for projects that promote clean energy and environmental sustainability. 8. Road and Infrastructure Cess Purpose: To fund road and infrastructure projects. Details: Levied on petrol and diesel. The cess was Rs. 8 per liter as of the latest revisions. Funds collected are earmarked for road construction and maintenance, particularly in rural areas. 9. Research and Development Cess Purpose: To promote research and development activities. Details: Levied at 5% on all payments made for the import of technology. The collected funds are used to support R&D activities within the country. The R&D Cess Act, 1986 governs this levy. 10. Goods and Services Tax (Compensation to States) Cess Purpose: To compensate states for revenue loss due to the implementation of GST. Details: Levied on certain luxury and sin goods, like tobacco products and luxury cars. The rate varies depending on the product. The collected funds are distributed to states to compensate for any shortfall in their revenue post-GST implementation. Important Points to Remember - Specific Purpose: Each cess is levied for a specific purpose, and the funds collected are used only for that purpose. Non-shareable with States: Unlike other taxes, the revenue from cess is not shared with the states and is retained by the central government. Additional Burden: Cess is an additional tax on top of existing taxes and can increase the overall tax burden on individuals and businesses. Cess Rates: The rates of cess can be revised from time to time based on government policies and requirements. Understanding the different types of cess and their purposes is essential for comprehending how the government funds various public welfare schemes and initiatives.