Meaning and Difference of ‘ Cess ‘ , ‘ Tax ‘ , ‘ Fee ‘ and ‘ Surcharges ‘

In recent years, we have encountered the term ‘cess’ often, starting from the Swachh Bharat Cess to the most recent GST Compensation Cess. A cess is an earmarked levy, meaning that the proceeds are to be applied for a pre-determined end purpose. Proceeds from such cesses are to be identified separately within the Consolidated Fund of India. The proceeds must be appropriated and utilised only for the earmarked purpose. Cesses imposed by the Centre for ‘specific purposes’ are not shared with the state governments on account of Article 270.

A cess may bear the characteristics of a tax or a fee.

Taxes are compulsory payments to be made by the public at large for helping the government garner revenues for fulfilling its obligations as a welfare state.

Fees, on the other hand, are payments collected by the government to render specific services to the payer. As a consequence, a person paying a tax has no right to a quid pro quo upon contribution, while a person paying a fee does.

Cess taxes are referred to in Article 270 but this is with respect to the proceeds outside the divisible pool. By itself, Article 270 does not empower the Centre to impose cess taxes. The competence has to be drawn from other provisions of the Constitution.

Surcharges : Ordinarily, the Parliament also has the power to impose surcharges. A surcharge, unlike a cess, is a tax on tax, forming part of the Consolidated Fund of India. The proceeds are exclusively at the disposal of the Centre and can be used for any public purpose. However, the Council cannot recommend the imposition of a surcharge over and above the GST rates on account of the amended Article 271 which prohibits the same

Within the GST regime, the power must necessarily flow from Article 297A, that talks of the powers of the Council.