Jump in cesses, surcharges in Gross Tax revenue to 28.08% in a decade

NEW DELHI: Substantial rise in the share of cesses and surcharges in the country's gross tax revenue has been recorded over the years.

The share of cesses and surcharges was 8.16 per cent of gross tax revenue in 2011-12 and 28.08 per cent of gross tax revenue in 2021-22, said the Ministry of Finance in a written reply in the Lok Sabha on Monday.

The Ministry said that a major reason is the imposition of GST Compensation Cess, which is entirely used for payment of compensation to the states and flows to states as Grants-in-Aid, in their Receipts Budget.

Resources from the other cesses are allocated to different schemes and programmes in the Union Budget, which are implemented by the states and other implementing agencies. States voice their views on the matter of levy of cesses and surcharges in various forums, including in Parliament. As per provisions laid under Article 270 of the Constitution of India:

"All taxes and duties referred to in the Union List, except the duties and taxes, surcharge on taxes and duties and any cess levied for specific purposes under any law made by Parliament shall be levied and collected by the Government of India and shall be distributed between the Union and the states.

The aforesaid Constitutional provision forms the basis for cess collection and utilisation for Union Government," said the Ministry in the reply. The Ministry informed that a few states have requested for extension of payment of GST compensation beyond the transition period of five years.

As per Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016, Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the states for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years.

Accordingly, the GST (Compensation to States) Act, 2017 had been enacted by Parliament. The Central government is committed to payment of GST compensation to the states/UTs for five years as per the Constitutional provisions, it said.