Executive Summary:
This document comprises the Indian Government's response to Lok Sabha Unstarred Question No. 3645, concerning the introduction and utilization of cesses. It details the process for introducing a cess, the legal provisions for levying it, guidelines for utilization, recently introduced cesses, and cess/surcharge collection amounts over the last five years. The reference period includes fiscal years 2020-2021 through projected estimates for 2025-2026.
Key Points / Main Content:
Introduction and Legal Basis of Cesses:
* Cesses are introduced via the Finance Bill in the Union Budget or through a separate Act of Parliament.
* Article 270 of the Constitution of India empowers the Government to levy and collect cesses for specific purposes under laws made by Parliament.
Utilization of Cess Revenue:
* Cess and surcharge receipts are deposited into the Consolidated Fund of India.
* These funds are used to finance development and welfare measures in states through Central Government schemes and initiatives.
Recently Introduced Cesses:
* Agriculture Infrastructure and Development Cess (AIDC): Imposed via Section 124 of the Finance Act, 2021, on specified imported goods to finance agricultural infrastructure and development.
* Health Cess: Imposed via Section 141 of the Finance Act, 2020, on specified imported medical devices to finance health infrastructure and services.
* Compensation Cess: Levied on certain luxury and demerit goods under Section 8 of the GST Compensation to States Act, 2017, to compensate states for revenue loss due to GST implementation from July 1, 2017, to June 30, 2022; the cess is transferred to the GST Compensation Fund.
Cess and Surcharge Collection:
* Annexure A provides details of cess and surcharge amounts collected over the last five years, along with year-on-year percentage increases.
Government Intention:
* The Government does not intend to cap the collection of cesses and surcharges at a certain percentage of gross tax revenue or include any excess in the divisible pool.
Impact Analysis:
Government of India:
* Impact: The policy outlines the government's authority and procedures for levying and utilizing cesses for specific developmental purposes.
* Action Required: Ensure compliance with Article 270 of the Constitution when levying cesses and adhere to established procedures for introducing them.
State Governments:
* Impact: States benefit from the utilization of cess revenues through various Central Government schemes and initiatives. Compensation Cess aims to offset revenue losses arising from GST implementation.
* Action Required: Monitor the allocation and utilization of funds received through Central Government schemes financed by cess revenues.
Taxpayers (Importers, Manufacturers, Consumers):
* Impact: Certain taxpayers are required to pay cesses on specific goods and services (e.g., imported goods, luxury items, demerit goods), potentially increasing their costs.
* Action Required: Understand the applicability of different cesses to their transactions and ensure compliance with payment obligations.
Key Entities Referenced
Finance Act, 2021: Legal document under which Agriculture Infrastructure and Development Cess (AIDC) was imposed.
Finance Act 2020: Legal document under which Health cess was imposed.
GST Compensation to States Act, 2017: Legal document that provides for levy of Compensation Cess on certain goods for payment of compensation to States for loss of revenue arising on account of GST implementation.
Agriculture Infrastructure and Development Cess (AIDC): A duty of customs on specified imported goods for financing the agricultural infrastructure and other development expenditure.
Health cess: A duty of customs on specified imported medical devices for the purposes of financing the health infrastructure and services.
Compensation Cess: A cess levied on certain luxury and demerit goods for the purpose of payment of compensation to States for any loss of revenue arising on account of GST implementation.
Consolidated Fund of India: Fund where receipts from cesses and surcharges are deposited and used to finance development welfare measures in the States.
GST Compensation Fund: A non-lapsable fund which forms part of the Public Account of India, used for payment of compensation to states for loss of revenue due to GST.
Government of India
Ministry of Finance
Department of Revenue
LOK SABHA
UNSTARRED QUESTION NO. 3645
TO BE ANSWERED ON MONDAY, AUGUST 11, 2025/SRAVANA 20, 1947 (SAKA)
INTRODUCTION AND UTILISATION OF CESS
3645. SHRI G Kumar Naik :
Will the Minister of FINANCE be please to state:
(a) the process by which cess is introduced in the country;
(b) the specific legal provisions under Indian law that empower the Government to levy a cess;
(c) whether there is any guidelines or criteria for the introduction and utilisation of such a cess;
(d) the details of cesses introduced recently and the purposes for levying Cess and outcomes expected from such
cesses;
(e) the details of amount of cess and surcharge collected by the Government along with the percentage increase during
the last five years; and
(f) whether the Government intends to cap the collection of cesses and surcharges at a certain percentage of gross tax
revenue and include any excess in the divisible pool and if so, the details thereof?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) Cess is introduced as part of Finance Bill presented in the Union Budget or by way of a separate act
of Parliament.
(b) As per Article 270(1) of the Constitution of India, any cess levied for specific purposes under any law made by
Parliament shall be levied and collected by the Government of India.
(c) Receipts from cesses and surcharges form part of Consolidated Fund of India and are used to finance the
development/welfare measures in the States through various Central Government schemes and initiatives.
(d) The details of cess introduced recently:
(i) Agriculture Infrastructure and Development Cess (AIDC) was imposed vide Section 124 of the Finance Act, 2021
as a duty of customs on specified imported goods for financing the agricultural infrastructure and other development
expenditure.
(ii) Health cess was imposed vide section 141 of the Finance Act 2020, as a duty of customs on specified imported
medical devices, for the purposes of financing the health infrastructure and services."
(iii) Compensation Cess: A cess known as Compensation Cess is being levied on certain luxury and demerit goods as
per provision under Section 8 of the GST (Compensation to States) Act, 2017 for the purpose of payment of
compensation to States for any loss of revenue arising on account of implementation of GST for five years i.e. from
1st July, 2017 to 30th June, 2022. The cess is transferred into a non-lapsable Fund known as GST Compensation Fund
which forms part of the Public Account of India as provided in Section 10(1) of the Act.
(e) The amount of cess and surcharge collected by the Government during the last five year’s along with the
percentage increase, on year-on-year basis, is enclosed as Annexure ‘A’.
(f) No Sir.
*******Annexure A
Statement showing details of Major Cesses and Surcharges levied and collected as part of principal taxes
( ₹ crore )
Name of the levy and tax Actuals Actuals YoY Actuals YoY Actuals YoY RE YoY BE YoY
Sl.
receipt heads 2020-21 2021-22 Growth 2022-23 Growth 2023-24 Growth 2024-25 Growth 2025-26 Growth
MAJOR CESSES IN OPERATION:
AGRICULTURE
1 INFRASTRUCTURE & ... 76950.68 … 74142.03 -3.65% 80923.6 9.15% 75180.00 -7.10% 80030.00 6.45%
DEVELOPMENT CESS#
2 CESS ON CRUDE OIL 10894.44 19353.84 77.65% 21497.14 11.07% 18803.41 -12.53% 17810.00 -5.28% 19330.00 8.53%
3 CESSES ON EXPORTS 9214.64 1457.1 -84.19% 852.44 -41.50% -3.19 -100.37% 10.00 -413.48% 11.00 10.00%
GOODS & SERVICES TAX
4 85191.91 104768.66 22.98% 125862.41 20.13% 141436.16 12.37% 153440.00 8.49% 167110.00 8.91%
COMPENSATION CESS
HEALTH & EDUCATION
5 35821.55 52732.33 47.21% 61809.29 17.21% 71156.96 15.12% 85300.00 19.88% 94000.00 10.20%
CESS
NATIONAL CALAMITY
6 5098.81 6138.3 20.39% 7168.3 16.78% 7812.25 8.98% 9610.00 23.01% 10380.00 8.01%
CONTINGENT DUTY
ROAD AND
7 235782.55 195986.96 -16.88% 59234.95 -69.78% 44552.49 -24.79% 45250.00 1.57% 47420.00 4.80%
INFRASTRUCTURE CESS*
Grand Total (1 to 7) 382003.90 457387.87 19.73% 350566.56 -23.35% 364681.68 4.03% 386600.00 6.01% 418281.00 8.19%
* Includes additional duty of excise on petrol and diesel, which were known as 'road cess' before introduction of 'road and infrastructure cess'.
# Levy of cess has commenced from FY 2021-22.
( ₹ crore )
Sl. Name of the levy and tax Actuals Actuals YoY Actuals YoY Actuals YoY RE YoY BE YoY
No. receipt heads 2020-21 2021-22 Growth 2022-23 Growth 2023-24 Growth 2024-25 Growth 2025-26 Growth
SURCHARGES LEVIED ON -
1 Corporation Tax 14078.57 15890 12.87% 55103.79 246.78% 60373.34 9.56% 60000.00 -0.62% 70000.00 16.67%
Taxes on Income other
2 5537.78 7922.88 43.07% 53914.24 580.49% 54793.8 1.63% 76000.00 38.70% 85000.00 11.84%
than Corporation Tax
3 Fringe Benefit Tax 0.37 ... … ... … ... … ... … ... …
Social Welfare Surcharge
4 13447.39 16945.06 26.01% 16178.79 -4.52% 16273.41 0.58% 17250.00 6.00% 17500.00 1.45%
under Customs
Grand Total (1 to 4) 33064.11 40757.94 23.27% 125196.82 207.17% 131440.55 4.99% 153250.00 16.59% 172500.00 12.56%