Cess
Taxation Intermediateउपकर
Definition
A cess is a tax levied on top of existing taxes for a specific purpose. Health and Education Cess (4%) is levied on income tax and corporate tax. Other cesses include Road and Infrastructure Cess on petrol/diesel. The key feature is that cess revenue is NOT shared with states — it stays entirely with the Centre and is excluded from the divisible pool.
How Cess Appears in India's Budget
Growing use of cesses and surcharges has been criticised as it reduces states' share of Central taxes since these are excluded from the divisible pool.
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Why Cess Matters
Understanding cess is essential for anyone following government finances, preparing for competitive exams, or analysing India's economic policy. This concept directly affects how the government allocates resources and plans its fiscal strategy.
In the context of India's Union Budget 2026-27, with a total size of Rs 53.47 lakh crore, terms like cess help citizens and analysts evaluate whether the government is on the right fiscal path. The numbers in the budget are only meaningful when one understands the underlying concepts.
For UPSC aspirants, cess is frequently tested in both Prelims and Mains, particularly in Paper III (Economic Development). For CA and MBA students, this concept appears in public finance and macroeconomics courses.
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