Why in News?
The Centre plans to introduce two Bills to impose new excise duties and a Health Security/National Security Cess on tobacco, pan masala, and related products, as the GST Compensation Cess regime is set to lapse.
Description:
GST Compensation Cess:
- It is a special cess levied on sin and luxury goods to compensate States for revenue loss after the introduction of GST (2017). The compensation period ended on 30 June 2022.
- But cess collection continues till March 2026 only to repay loans taken by the Centre to meet compensation obligations during COVID-19 years.
About Cess:
- Article 271 empowers the Union Government to levy surcharges and cesses for Union purposes.
- A cess is a tax on tax (levied on the tax liability, including surcharge).
- Imposed for a specific, identified purpose → public health, education, sanitation, infrastructure, etc.
- Named after the purpose: e.g., Swachh Bharat Cess, Krishi Kalyan Cess, Infrastructure Cess, Road & Infrastructure Cess, Clean Energy Cess, Cess on Crude Oil.
- Proceeds go to the Consolidated Fund of India (CFI), but used only for the stated purpose.
- Not shared with states → the Union retains full control.
- Often used to finance centrally sponsored schemes and targeted spending.
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