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The government can impose cess for purposes such as disaster relief,
generating funds for cleaning rivers, etc. For example, after Kerala
floods in the year 2018, the state government imposed a 1% calamity
cess on GST and became the first state to do it. In other instances, the
central government may levy an education cess, or a health cess, or a
sanitation cess. All these levies are usually imposed as a percentage of
the taxpayer’s basic tax liability. Under the GST (Goods and Services
Tax) regime, certain sin goods and luxury items also attract a cess.
What is the difference between tax and cess? What is cess tax?
Cess is different from taxes such as income tax, GST, and excise duty etc
as it is charged over and above the existing taxes. While all taxes go to
the Consolidated Fund of India (CFI), cess may initially go to the CFI but
has to be used for the purpose for which it was collected. If the cess
collected in a particular year goes unspent, it cannot be allocated for
other purposes. The amount gets carried over to the next year and can
only be used for the cause it was meant for. The central government
does not need to share the cess with the state government either
partially or in full, unlike some other taxes.