Government expects to collect Rs 8,000 crore from two new cesses

The cess would be used exclusively for financing initiatives relating to improvement of agriculture and welfare of farmers. The cess would come into force from 1 June 2016.

By Dipak Mondal  
Tuesday, March 1, 2016

There were more cesses announced in this budget. The government plans to raise Rs 5,000 crore by levying a 0.5 per cent Krishi Kalyan cess on all taxable services. With this cess, the service tax rate is now 15 per cent.

The cess would be used exclusively for financing initiatives relating to improvement of agriculture and welfare of farmers. The cess would come into force from 1 June 2016.

Besides, there is infrastructure cess to be levied on cars and SUVs. The cess would be 1 per cent on small petrol, LPG, CNG cars, 2.5 per cent on diesel cars of certain capacity and 4 per cent on other higher engine capacity vehicles and SUVs.

Last year, the government had imposed Swachh Bhart cess on all taxable services. As per the revised estimate, the government collected Rs 3,750 crore through Swachh Bharat Cess in for 2015/16. In the next financial year the government hopes to collect Rs 10,000 crore through the Swachh Bharat Cess. The government hopes to collect Rs 3,000 crore from infrastructure cess.

The government also renamed the Clean Energy Cess to 'Clean Environment Cess' and simultaneously increase its rate from Rs 200 per tonne to Rs 400 per tonne. Due to this increase the government hopes to more than double the collection through this cess from Rs 12,623 crore to Rs 26,148 crore

In a post-budget press conference, when asked why the government is continuously levying so many cesses, finance minister Arun Jaitley said that the government need money to spend on infrastructure and at same time maintaining the fiscal deficit target of 3.5 per cent in the next financial year.

He further said that once the GST is implemented, these cesses would automatically get subsumed.

Meanwhile, the government abolished 13 cesses, levied by various Ministries in which revenue collection is less than Rs 50 crore in a year. This the finance minister said was done to reduce multiplicity of taxes, associated cascading and to reduce cost of collection.

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