Cess

A cess is a tax imposed to raise money for a specified purpose, such as education or health. Unlike a general tax, whose proceeds support overall government expenditure without being earmarked for one objective, a cess links revenue collection to a designated purpose.

Purpose and design

The defining feature of a cess is purpose-specific earmarking, not merely its name or method of calculation. A cess may be calculated as an additional charge on an existing tax, but its precise base and rate depend on the law imposing it.

• A general tax finances the government's expenditure broadly, while a cess is intended to finance the purpose specified in its governing law.
• An education cess illustrates this distinction: its stated purpose concerns education rather than unrestricted expenditure.

Treatment in Centre-state revenue sharing

Article 270 excludes cesses levied for specific purposes under laws made by Parliament from the taxes distributed between the Union and the states.

• Such Union cesses are outside the divisible pool, so states do not receive a share through constitutional tax devolution.
• This does not prevent the Union from spending cess-funded resources in states or supporting schemes implemented by them.
• General Union taxes covered by Article 270 contribute to the divisible pool; not every Union tax is shareable.

Budgeting and accountability

Earmarking does not itself authorise expenditure. Under Article 266, Union revenues ordinarily enter the Consolidated Fund of India, and Article 114 requires parliamentary appropriation before money can be withdrawn.

• Cess collections and their utilisation therefore require budgetary accounting and scrutiny to assess whether spending serves the designated purpose.