Govt defends growing reliance on cess, surcharges amid calls for transparency

New Delhi: In recent years, the Central government has increasingly relied on cess and surcharges to generate additional revenue for targeted development projects. These levies, collected alongside principal taxes, play a crucial role in financing key infrastructure, education, health, and welfare schemes. A closer look at the data on cess and surcharge collections since 2014 reveals significant trends in taxation policy and fund allocation.

The Central government informed the Parliament on Tuesday that cess and surcharges are designed to serve specific fiscal purposes without directly replacing broader tax structures like the Goods and Services Tax (GST) or income tax. Data from the Ministry of Finance highlights a steady increase in collections over the past decade, reflecting both the Government’s evolving fiscal strategy and its emphasis on revenue generation for dedicated funds.

In a written reply in the Lok Sabha, the Union Finance Minister Nirmala Sitharaman mentioned that among the major cess categories currently in operation, the agriculture infrastructure and development cess has consistently been a substantial contributor. Official data shows that collections from this levy reached Rs 80,030 crore in 2024-25, supporting key agricultural initiatives such as the ‘Pradhan Mantri Fasal Bima Yojana’, PM-Kisan, and the ‘Rashtriya Krishi Vikas Yojana’. Similarly, cess on crude oil has been another major revenue source, with collections surpassing Rs 19,330 crore in 2024-25.

Trinamool Congress MP from Diamond Harbour, Abhishek Banerjee, and BJP MP from Jaipur Rural, Rao Rajendra Singh, and sought information from the Union Finance Minister regarding the Government’s record-keeping on cess and surcharge collections since 2019, along with a detailed breakdown of the revenue generated from these levies, year-wise and item-wise, excluding the GST compensation cess, since 2014.

They also inquired about the utilisation of funds collected through cess and surcharges over the past five years for public welfare initiatives. Additionally, they questioned whether these levies had been used to replace or supplement other existing forms of taxation under different subheads. If so, they requested specific instances of such occurrences and the rationale behind these adjustments.

In the reply, Sitharaman also mentioned that the imposition of health-related cess has also been notable, with the Health and Education Cess generating Rs 94,000 crore in 2024-25. This fund is channelled into programmes such as Ayushman Bharat and various national health missions aimed at improving medical education and public healthcare infrastructure. Meanwhile, road and infrastructure cess collections, which exceeded Rs 1,00,034.5 crore, have been instrumental in financing highway construction, rural road connectivity projects, and railway safety initiatives.

Surcharges, which are additional charges on corporate and personal income tax, have also played a crucial role in the Government’s revenue stream. Collections under corporation tax surcharges have seen a significant rise, reaching Rs 70,000 crore in 2025-26. Similarly, surcharges on income tax for non-corporate entities, projected to generate Rs 85,000 crore in 2025-26, contribute to the broader fiscal stability of the country.

The utilisation of these funds is equally important. Over the past five years, cess and surcharge revenues have been allocated to various reserve funds that finance Central government schemes. The Central Road and Infrastructure Fund, for instance, received substantial allocations exceeding Rs 2,39,646 crore in 2022-23, supporting critical investments in national highways, rural roads, and urban transport infrastructure. The Madhyamik and Uchhatar Shiksha Kosh has also been a key recipient, funding higher education initiatives, skill development programmes, and scholarships for meritorious students.

Despite their advantages in earmarking funds for specific purposes, cess and surcharges have raised concerns regarding fiscal transparency and equitable tax distribution. Unlike regular taxes, these levies are not shared with state governments, leading to calls for a more balanced revenue-sharing mechanism.