Cess and surcharge constitute types of taxes a Union Government levies on its citizens to gain revenue for government functioning. Despite both being tax types, they are subtly different.
The key differences between them have been listed for a clearer understanding for students aspiring to crack the UPSC exam. These differences are essential to their future job role.
Let’s find out the difference between cess and surcharge for UPSC.
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What is Cess?
In simple terms, a cess is a tax on tax. The Indian Government levies it on the tax liability, including surcharge, and is used for a specific purpose. For example, the Indian Government collects a cess on education and utilises it specifically for that purpose alone, that is, education. Moreover, this cess applies to all taxpayers.
Further, cess taxes go to the Consolidated Fund of India. It is vital to note that a cess must be applicable for that purpose alone for which it is charged.
UPSC aspirants must also go through the different types of central government funds mentioned in the linked article.
Example of Cess
Here is an example to demonstrate how cess works.
For an education cess of 3%, where the personal income tax is 30%, a cess is applicable on this personal income tax amount of 30%. Hence, this total tax rate goes up to 30.9% (30% income tax + (3% of 30% income tax)).
Visit the linked article to understand the taxation system in India as it is an important concept in the economy of a country.
Types of Cess
There are various types of cess levied in India. They are:
- Infrastructure Cess on motor cars
- Krishi Kalyan Cess on Service Value
- Swachh Bharat Cess
- Education Cess
- Cess on Crude Oil
- Cess on Exports
- Road and Infrastructure Cess
- Duty on Tobacco and Tobacco Products
- Health and Education Cess on Income Tax
After the Kerala floods, the State Government imposed a 1% Calamity Cess. It was the first state to do so. Remember that a cess is not a permanent revenue source for the Government. Once the purpose for which the cess is levied is completed, it is removed.
What is Surcharge?
A surcharge applies to those persons whose income is more than Rs. 50 lakhs. This money is not collected for any specific cause but can be used for any reason as the Union Government sees fit. Interestingly, it applies to the tax payable and not the total income. This collection also goes to the Consolidated Fund of India and can be used for any purpose.
Example of Surcharge
A significant source of government income is a surcharge on income tax. For example, a surcharge of 10% on the income tax rate of 30% raises the tax burden to 33%.
Given below are a few other economy-related links from the UPSC Syllabus for the reference of candidates:
| Value Added Tax | Goods and Services Tax (GST) |
| Direct Tax Code | Double Taxation Avoidance Agreements (DTAA) |
| Tax Policy Council & Tax Policy Research Unit | Central Board of Direct Taxes |
What is the Difference between Cess and Surcharge?
The difference between cess and surcharge is as follows:
| Cess | Surcharge |
| The cess rate stands fixed at 4%. | The surcharge rate varies among 10%, 15%, 25%, and 37%, depending on the total income of a taxpayer. |
| Authorities calculate cess on the surcharge and the total tax. | Surcharge is calculated on the total tax amount only. |
| The Government levies cess on every taxpayer. | The Government levies a surcharge on those individuals who have a higher taxable income. |
| Authorities use cess for a particular purpose only and cannot use it for any arbitrary reason. | A surcharge, on the other hand, can be used for any reason. The reason does not have to be specified. |
| cess aims to raise funds for some particular expenditure cause. | A surcharge aims to place a tax burden on those whose income is beyond Rs. 50 lakhs. |
Similarities between Cess and Surcharge
- The Central Government levies both cess and surcharge.
- Both are collected and taken into the Consolidated Fund of India.
- State Governments cannot share any of these.
For the convenience of candidates over 100 difference between articles have been curated for the reference of IAS aspirants. These comprise a comparative analysis of varied topics from environment, science and technology, economy, etc. Candidates can visit the linked article and start with their preparation.
Thus, aspirants for the UPSC exam can gain a comprehensive understanding of the difference between cess and surcharge through this article. Aspirants can also refer to other relevant course material to better understand this topic.
Frequently Asked Questions
Why did the Indian Government levy an education cess?
The Indian Government levied an education cess to provide a quality standard of education for poor people.
When was the Swachh Bharat cess introduced?
The Swachh Bharat cess was introduced in 2015.
Why was the infrastructure cess introduced?
This cess was introduced in Union Budget 2016 to build the nation’s infrastructure.
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