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The stock of cess arsenic portion of the Union government’s gross taxation gross has tripled, up from 6 per cent successful 2011 to 18 per cent successful 2021.
“Chief Minister Narendra Modi contiguous accused the Centre of adopting a argumentation of coercive federalism and frankincense pushing states to a subordinate presumption by monopolising each powers of fiscal allocations, reducing adjacent the law rights of states,” (IE, January 16, 2012).
Your columnist distinctly remembers the past concern minister, the affable Arun Jaitley, inviting astir fractional a twelve chap MPs to his country successful Parliament for a hearty luncheon sometime successful 2015. Our gracious big wanted to observe the bully news: The 14th Finance Commission had recommended expanding the devolution of the divisible taxation excavation to states from 32 per cent to 42 per cent. We each saw this arsenic a large triumph for federalism. But Jaitley’s boss, the erstwhile main curate of Gujarat, had different ideas. A dirty, four-letter connection that damages federalism: Cess.
As immoderate undergraduate successful commerce volition archer you, cess is not a portion of the divisible pool; that is, the wealth collected is not shared with authorities governments. A cess is simply a circumstantial taxation imposed by the Union authorities to rise funds for a designated purpose. The Union authorities presently levies a GST compensation cess, a cess connected wellness and education, roadworthy and infrastructure, agriculture and development, Swachh Bharat, exports, and crude oil, among others.
Consider this. In 2012, cess formed 7 per cent of the Union government’s full taxation revenues. In 2015, this roseate to 9 per cent. In 2023, cess contributed to 16 per cent of the full taxation revenue. From 2019-23, the Union authorities has collected a whopping Rs 13 lakh crore arsenic cess. This excludes GST compensation cess. In the past 5 years, it has collected Rs 84,000 crore arsenic cess connected crude oil.
The stock of cess arsenic portion of the Union government’s gross taxation gross has tripled, up from 6 per cent successful 2011 to 18 per cent successful 2021. This emergence successful cess and surcharge has inversely led to a simplification successful the divisible excavation of taxes. The divisible excavation has shrunk from 89 per cent of gross taxation gross successful 2011 to 79 per cent successful 2021. This, contempt the 10 per cent summation successful taxation devolution to states arsenic recommended by the 14th Finance Commission.
A Comptroller and Auditor General (CAG) study exposed that successful 2018-19, the Union authorities withheld Rs 1 lakh crore of the Rs 2.75 lakh crore collected done assorted cesses successful the Consolidated Fund of India (CFI). Rs 10,000 crore of the Road and Infrastructure Cess collected during the twelvemonth was “neither transferred to the related Reserve Fund nor utilised for the intent for which the cess was collected”. More alarmingly, Rs 1.24 lakh crore collected arsenic cess connected crude lipid successful the past 1 decennary “had not been transferred to the designated Reserve Fund (Oil Industry Development Board) and was retained successful CFI”. The study further stated that “non-creation/non-operation of Reserve Funds makes it hard to guarantee that cesses and levies person been utilised for the circumstantial purposes intended by the Parliament”.
The cardinal crushed for the imposition of cess and surcharge is for the Union authorities to summation its revenue. One large disapproval has been its inability to summation gross substantially, contempt expanding cess. Revenue receipts person accrued lone marginally successful the past 10 years — from 8.8 per cent of GDP successful 2014 to 9.6 per cent of GDP successful 2024. Less than 1 percent.
Recently, the Chief Minister of Karnataka wrote to 8 different main ministers, of some NDA and Opposition governed states, expressing interest that states with higher per capita GSDP were being penalised for their economical show by receiving disproportionately little taxation allocations.
In the aboriginal 1980s, the Sarkaria Commission recommended that cesses and surcharges should beryllium levied for a circumstantial intent and for a constricted clip period. In 2010, the Punchhi Commission stated that “extension of cesses and surcharges amounts to dilution of the recommendations of the Finance Commissions and deprives the States of their owed stock successful Central taxation revenue”. It further elaborated that, “we urge that the Central Government should reappraisal each the existing cesses and surcharges with a presumption to bringing down their stock successful the gross taxation revenue”.
The recommendations of the Sarkaria Commission and the Punchhi Commission person been ignored. The fig and quantum of cess that is levied keeps increasing. States that ideologically reason the ruling dispensation are often deprived of their rightful dues. Seasoned Opposition MPs successful the corridors of Parliament rue the reality. TINSTAAFL (There is nary specified happening arsenic a escaped lunch)!
The writer is MP and leader, All India Trinamool Congress Parliamentary Party (Rajya Sabha), Additional probe by Ayashman Dey and Dheemunt Jain
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