What is CESS?
Cess is a tax on tax that is imposed by the central government for the purpose of creating funds that earmarked for a specific purpose. Article 270 of the Constitution describes a cess. Cesses may be levied by the union or state governments. Cesses are named after the identified purpose; the purpose itself must be certain and for public good.
In India, the cess is applicable to all taxpayers who pay taxes. Regardless of the amount of tax If any tax is generated on income, then he has to pay a tax on that tax also.
For instance, Health and education cess, Swachh Bharat cess, road and infrastructure cess, and cess on exports are some common forms of CESS that the government levies. All the names specify a specific cause for which the collection is made. The money so collected will be used for that specific purpose only. All the above mentioned cesses have now been abolished. The only active cess is Health and Education Cess charged at the rate of 4%.
What is Surcharge?
The surcharge is a fee added to any tax that has already been paid. The surcharge is a term that refers to an extra fee or levy. Generally the condition is dependent on the income earned. It is levied on all taxpayers. A threshold limit that states any person earning beyond the limit shall have to pay an additional tax on the income earned.
A surcharge is a tax on tax imposed for the purposes of the union. A surcharge is dealt with under Article 271 of the Constitution. In India, under the current tax provision, individuals earning an income of above Rs. 50 Lakhs & corporations earning above Rs. 1 crore, shall become liable to pay surcharge.
Difference Between Cess and Surcharge:
| Cess | Surcharge |
| Cess is a tax on tax. | The Surcharge is levied only on one’s net tax payable. |
| The cess is applicable to all taxpayers who pay taxes. | the surcharge is applicable on the net income tax payable, it is applicable only on taxpayers who fall in a particular tax bracket. |
| The Cess rate is 4%. | Surcharges can vary between 10%, 15%, 25%, and 37%. |
| Cess goes to CFI but can be used for a specific purpose only. | The surcharge goes to the Consolidated Fund of India (CFI) and can be spent on any purpose the government deems fit. |
| Cess tax is collected to raise funds for a particular cause like education, health, infrastructure, etc. | The government spends the Surcharge as it deems fit according to its requirements. |
Similarities Between Cess and Surcharge:
- The Central Government levies both cess and surcharge.
- Both are collected and taken into the Consolidated Fund of India.
- State Governments cannot share any of these.
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Note: This Post was last updated on March 22, 2023
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