What is the difference between Tax and Surcharge and Cess?

what-is-the-difference-between-tax-surcharge-and-cess


Cess is imposed by the central government and is a tax on tax and is levied for a specific purpose. It is levied until the government gets enough money for that purpose. The usage of the fund created out of cess is restricted to specific purposes only. For example, Education cess collected can be utilized only for financing education and not for any other purpose. 




Cess may be imposed on tax- like education Cess is imposed on the income-tax rate. It may also be imposed on ‘value’ like Swach Bharat Cess which was imposed on the Value of services. 

In case of revenue collected from cess it is first credited to the Consolidated Fund of India and the Central Government may after due appropriation from the Parliament utilize the fund for the specified purpose or credited to the specific fund. 

The central government is not required to share the revenue from cess with state governments. 

On the other hand, a surcharge is a tax on any tax. It is a tax on tax. The objective of imposing of levying surcharge is to put high tax burden on rich persons who can bear or have the capacity to pay high tax. Like Cess, the central government is not required to share the revenue from the surcharge with state governments. But it becomes a part of Consolidated Fund of India and goes directly to the fund. Thus it can be utilized for any purpose of the government. 

Tax is a source of revenue of any government. But the government in addition to tax also imposes Surcharge and Cess. 

Various types of Cess imposed by the government in India is like Infrastructure Cess on motor cars, Krishi Kalyan Cess on Service Value, Swach Bharat Cess, Education Cess, /health and Education Cess on Income Tax, etc. 

Let us look on the provision of income tax imposing Health & Education Cess @ 4 percent on income-tax - 

Section 2(13) of Finance Act, 2018 states that income tax as increased by surcharge, for the purpose of Union, shall be further increased by an additional surcharge, for the purpose of Union, to be called the “Health and Education Cess on Income Tax”, calculated @ 4 percent of such income-tax and surcharge- so as to fulfil the commitment of the government to provide and finance quality health services and universalized quality basic education and secondary and higher education. 

Apart from the provision, the Finance Minister in his budget speech announced that 4% health and Education Cess is imposed to take care of the needs of education and health of BPL and rural families. 

Rs. 11,000 crore is estimated to be collected from this cess. 

The rate of Surcharge for an individual is 10% if the income is in the range of Rs. 50 lakh and Rs. 1 crore. It is 15%, if the income exceeds Rs. 1 crore. 

In the end, Shakespeare said, What’s in the name – ultimately, tax, surcharge, cess – all are paid by the taxpayers

Tax 
Surcharge 
Cess 
Goes directly to CFI 
Goes directly to CFI 
Though Goes directly to CFI but its utilization is restricted 
Can be used for any purpose 
Can be used for any purpose 
Can be used for a specific purpose only 
Revenue is shared with the state government by the central government 
No such sharing 
No such sharing 

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