With reference to Cess consider the following statements 1 Proceeds of cess are distributed on...........

Economic Affairs Public Finance and Debt Management

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With reference to Cess, consider the following statements:

1. Proceeds of cess are distributed on the recommendation of Finance Commission.

2. Cess before levying needs to be passed through parliament by a simple majority.

3. Cess is earmarked for a particular purpose only and cannot be used for any other purpose.

Which of the statements given above is/are correct?

1 only

2 and 3 only

3 only

1, 2 and 3

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Explanation:

A cess imposed by the central government is a tax on tax, levied by the government for a specific purpose. Generally, cess is expected to be levied till the time the government gets enough money for that purpose.

For example, a cess for financing primary education – the education cess (which is imposed on all central government taxes) is to be spent only for financing primary education (SSA) and not for any other purposes.

A cess is different from the usual taxes like excise duty and personal income tax as it is imposed as an additional tax besides the existing tax (tax on tax).