“Cess”

What is Cess?

Cess is an additional tax on goods or services levied by the government for a specific purpose. It can be a percentage of the value of a taxable commodity or service, depending on the nature and purpose of the tax. It is usually collected from the buyer by the seller. The proceeds of cess is generally used to finance the public welfare projects or activities of the state or union government. Cess is usually imposed in addition to regular sales or services taxes.

What is the Difference Between Regular Tax and Cess?

Regular taxes are standard taxes imposed on individuals or organizations to fund government operations. On the other hand, cess is specific in nature, meaning that the government has a specific purpose for the revenue from the taxes. Cess is collected and kept by the government, and the money raised through the cess is used to finance certain and specific activities.

Common types of CESS in India

There are several types of cess levied in India, some of the more common ones are:

• Education Cess This is a 3% tax levied on salary, income-tax, custom and corporate taxes to fund educational development and research projects.
• Additional Excise Duty This is a 6% tax on the sale of certain items like precious stones, tobacco, and motor vehicles, with an additional 2% charged on aerated drinks, pan masala, and tobacco products.
• Special Additional Duty This is a 4% tax on some types of goods and services, such as mobile phones. Certain provisions of the special additional duty are applicable to the service tax, excise and import duty.
• Modernization Cess This is a 0.5% tax on non-essential goods, including automobiles, luxury items, and entertainment products.

FAQs

What is 4% cess in income tax?

The 4% CESS levied in India is an additional education tax charged on income tax and other taxes. It was implemented in 2004-2005 and is used to finance the government’s educational initiatives in the country.

When cess is increased from 3 to 4?

The Cess was increased from 3% to 4% in the Union Budget of 2020-2021. This is an attempt by the government to raise more funds for education initiatives in the country.