HYDERABAD: With the collection of cesses and surcharges becoming a permanent feature of the country’s tax regime, more so after Narendra Modi took reins as Prime Minister, Telangana government is all set to raise its voice against this ‘unhealthy’ practice. The cash-strapped State governments, due to the economic slowdown followed by the lockdown in view of the Coronavirus, are raising concerns over the ever-increasing share of cesses and surcharges in the gross tax revenue collection of the Union government. According to an estimate, Telangana is losing around Rs 3,000 crore every year due to the cesses and surcharges being collected by the Central government.
Losing revenues
The Fifteenth Finance Commission estimated that the cesses and surcharges would be around 17.8 per cent of the gross tax revenue of the Union government in 2020-21.As per the Article 270 of the Constitution of India, the cesses and surcharges would not form part of the divisible pool of taxes and the Centre need not share the same with the State governments. Thus, the States are losing huge chunk of revenues, sources pointed out.
The concern of Telangana is that total cesses and surcharges being collected by the Union government were increased almost by three times after the formation of the separate State. The cesses and surcharges were increased from around Rs 1.15 lakh crore in 2014-15 to over Rs 3.5 lakh crore now. This is a cause of concern for a progressing State like Telangana, which started various developmental and welfare programmes, sources said.
TS burdened by cesses, surcharges
“The Centre will release some portion of road cess and cess collected for Sarva Siksha Abhiyan to the States. But, we are losing heavily due to increase of cesses and surcharges in the Union Budget,” sources in Finance Department told Express. The alarming trend was that proceeds of cesses and surcharges constituted only 2.3 per cent of the gross tax revenue of the Centre in 1980-81 and they have now been increased to 17.8 per cent.
In this backdrop, Telangana government will once again request the FFC to recommend the Centre to bring the cesses and surcharges under the divisible pool of taxes. “We have been repeatedly requesting the successive FFCs over cesses and surcharges,” sources said.
KCR calls it ‘golmaal’
Chief Minister K Chandrasekhar Rao recently termed the ever increasing share of cesses and surcharges in gross tax revenue of the Union government as a “golmaal” (trick). “The Centre is not collecting the revenue in the form taxes. By taking the revenue in the form of cesses and surcharges, the Centre is causing heavy losses to the States. Rashtraalanu Munchutunnaru (destroying States),” he had said. The CM also objected to the very term of ‘devolution of taxes’. “The exact term should be States’ share in Central taxes. It is not a favour, it is the right of the States,” he had said.
Taxes on taxes
Ever-increasing cesses and surcharges in the gross tax revenue of the Central government is a cause of concern for States like Telangana Cesses or surcharges are nothing but taxes on taxes Cesses and surcharges are increased from 2.3% per cent of the gross tax revenue of the Central government in 1980-81 to 17.8% in 2020-21 8th FFC expressed concern over indefinite continuance of surcharges 13th FFC recommended reviewing the imposition of cesses and surcharges
Rs 3K cr loss per year
Telangana is losing around Rs 3,000 cr every year due to the cesses and surcharges being collected by the Central government