Education Cess, Current Cess Rate, Types of Cess

A Cess is an additional tax which is charged as a percentage on the basic amount of tax payable by a person. It is charged to raise funds for a predetermined specific objective of the government and cannot be used for any other purposes. Once the desired objective is achieved, the Cess is stopped to be levied.

A Cess can be charged additionally on services or income. Following are some common Cess' levied by the government.

1. Swachh Bharat Cess: Levied at the rate of 0.5% on all taxable services to achieve the goals laid down under "Swachh Bharat Abhiyaan."
2. Krishi Kalyan Cess: Levied at the rate of 0.5% on all services under the ambit of service tax to facilitate the development of better agricultural facilities in the country.
3. Infrastructure Cess: This Cess is levied on production of vehicles . The rate varies from 1% to 4% depending on the type of vehicle. The purpose of this Cess is to finance infrastructural projects.
4. Health and E ducation Cess: Charged on total tax payable, this tax is used to provide better health and education to people belonging to below poverty line (BPL) and rural background. The rate of this Cess was fixed at 4%.

Cess makes an important source of income for the government. Not only it is flexible in terms of modification, imposition, and abolishing but also helps to raise finance for implementing solutions to various problems of different sectors that are under stress and require considerable attention.One such sector is education. Various reports and indexes overtime have pointed out the need to provide seamless and quality education to children belonging to rural areas of the country.Therefore, the amount of education cess is utilised to implement various schemes aimed at solving the problem.After collection, the cess’ amount is transferred to the consolidated fund of India from where it is allocated towards the particular scheme/requirement.

• Started with 2% Initially, the amount was decided as 2% for explicitly addressing the issue of lack of access to basic education.

• Increased to 3% While this was in process, the government through the Finance Act of 2007, introduced an additional cess of 1% keeping in mind the problems being faced in accessing secondary and higher education in addition to basic education. Thus, an overall education cess of 3% was levied on all taxes until 2018.

• Introduction of Health and Education Cess at 4% In 2018, while presenting the budget in the parliament, the then Finance minister Mr Arun Jaitley, emphasised the need to provide quality healthcare services to BPL people by setting up government hospitals in remote areas.He also focused on the objectives of the government to introduce reforms in rural education like the development of ‘Eklavya’ model schools, qualitative improvement of teachers, digitisation in education etc.Therefore, a new cess was introduced by the name of "Health and education cess " which replaced the existing Cess. The rate was decided to be 4% of the payable tax amount.

This Cess increases the overall tax liability of a person. Thus, in addition to the tax amount, (s)he is required to pay a little more by way of Cess. Example, A person has a taxable income of Rs. 800000, which attracts a tax at the rate of 15%. Thus, the amount of tax to be paid will be Rs.12000. will be calculated on Rs. 12000, at a rate of 4%. education cess Now, the amount of health andTherefore, the gross amount to be paid will be Rs. 12,000+480 = Rs.12,480With the improvement in quality and access of education being one of the Sustainable Development Goals (SDG) to be achieved by 2030, it has become important for the Indian government to weed out all the problems confronted by the education sector of the country. By raising adequate finances through Cess, the government is trying it’s best to address the issue.Therefore, it is a duty as responsible citizens to contribute to the objective of the government.

The additional tax that the government charges as a percentage on the basic amount of tax that a person needs to pay is called cess. There are different cess charged by the government, such as Swachh Bharat Cess, Infrastructure Cess , Krishi Kalyan Cess, Health and Education Cess, etc.Its calculation depends on the percentage of cess levied-

• Krishi Kalyan Cess This cess is levied to develop agricultural facilities. It is levied at the rate of 0.5% on all services under the ambit of service tax.
• Swachh Bharat Cess It’s levied at the rate of 0.5% on all taxable services.
• Health and Education Cess Health and Education Cess is charged on total tax payable. This cess is used to provide better education and health services to people belonging to the rural background and below poverty line (BPL).

There are various cess charged by the government. Typically, each cess is charged at a different rate.Here are the rates of some cess-

• Krishi Kalyan Cess is charged at 0.5%.
• Swachh Bharat Cess is charged at 0.5%.
• Health and Education Cess is charged at 4% of Income Tax.

What is Surcharge?

A surcharge is a charge on any tax. It is charged on tax that is paid.Mainly, it is levied on income tax. It’s also levied on corporate tax . One of the features of a surcharge is that it doesn’t need to be shared with states.

What is Cess?

A cess is imposed by the central government. It is levied in order to achieve a specific goal. For instance, Krishi Kalyan Cess is levied to develop agricultural facilities.
It’s different from other taxes like personal income tax as it is levied additionally with existing tax.Furthermore, revenue from the usual taxes, like personal income tax, is deposited in Consolidate Fund of India (CFI). It can be used by the government for any purpose.
While the revenue generated from cess is first credited to CFI, the central government can’t use it until due appreciation is made by Parliament. Furthermore, cess can be used for a specific purpose solely.

Difference Between Cess and Surcharge

The main difference between cess and surcharge is how they can be used. The surcharge can be used for any purpose. However, cess can be used for the specific purpose for which it was created.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.