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What is difference between Cess and Surcharge?

What is difference bw Cess and Surcharge ?
Do these form part of Consolidated Fund of India ?

[ Single punctuation marks convey the same information and do it much more elegantly. ]
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Comments

  • Surcharge is a charge on any tax, charged on the tax already paid. We usually pay it on electricity bill It goes into the consolidated fund of India. That way the govt can spend it on any item it deems fit.

    On the other hand, a cess is always preceded by the item, like education cess, irrigation cess, etc.

    For example, right now in Service Tax, the provision is of 12% + Education cess + Higher Education Cess.

    Now suppose the value of taxable service is Rs.100. Service tax @10% will be Rs.10 and Education Cess @2% of the Service Tax will be Rs.0.20 and Secondary & Higher Education Cess @1% of the service tax will be 0.10.
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  • Good reply @witwiki

    I would like to add here, (which is implicit in witwiki's answer), that the difference is that while surcharge goes to consolidated fund of India and can be used for any purpose, a cess is earmarked for a particular purpose only, as pointed out in the example given by witwiki.
    *No good deed goes unpunished*
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  • @Sun4CS , A small 'Like' and thanks msg encourages people to reply quickly to your queries.
    *No good deed goes unpunished*
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  • well explained. thanks.
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  • @Sun4CS , A small 'Like' and thanks msg encourages people to reply quickly to your queries.
    @witwiki thank you
    @Neyawn to you to
    Rank : "awaited"
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  • what is the difference between royalty and premium?
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  • Well on what aspect or in what context are you asking this? it would help in giving a better answer.

    Royalty - Payment for the use of technology or other IPR by a 3rd party who has no natural rights over such patented tech/process etc. Like Maruti paying Suzuki in the past and Bajaj before it was able to develop indigenous motors, used Kawasaki models, Hero used Honda etc.

    Initially few of them were JVs but later the partner got out and the Indian firm decided to pay royalty for the tech. transfer in those cases.

    It can also be for usage of brand, trademark etc. Music industry pays posthumous royalties to families of MJ, Elvis :P I wish i was one of his grand child ;).

    premium - In general, it is the price that the buyer or the anyone is willing to pay over and above the perceived market rate of that good.
    Mankind was corrupt from the time of Adam & eve, why complain now :) || कांथर हुनु भन्दा मर्नु राम्रो || वीर भोग्या वसुंधरा
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  • @baddie

    Royalty refers to the sum paid for usage of resources. For example if you want to use sand for construction purpose, you are supposed to pay royalty per cubic meter of sand to the government as you are using up a resource.

    Premium is what you are willing to pay for using an item at the excess of what it is going to cost. For example if you want to bid for a project in PPP, if you are willing to pay the government a certain sum annually for attaining the project, it is called a premium. You can observe premiums in widening of heavy trafficked roads.
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  • @bharat141 what s mean by the term premium in Gold, Insurance,,,?
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  • Surcharge is a charge on any tax, charged on the tax already paid. We usually pay it on electricity bill It goes into the consolidated fund of India. That way the govt can spend it on any item it deems fit.

    On the other hand, a cess is always preceded by the item, like education cess, irrigation cess, etc.

    For example, right now in Service Tax, the provision is of 12% + Education cess + Higher Education Cess.

    Now suppose the value of taxable service is Rs.100. Service tax @10% will be Rs.10 and Education Cess @2% of the Service Tax will be Rs.0.20 and Secondary & Higher Education Cess @1% of the service tax will be 0.10.
    Good reply @witwiki

    I would like to add here, (which is implicit in witwiki's answer), that the difference is that while surcharge goes to consolidated fund of India and can be used for any purpose, a cess is earmarked for a particular purpose only, as pointed out in the example given by witwiki.
    Isn't cess charged on taxable income plus surcharge?? i.e it should be Rs 0.22+ Rs 0.11

    Enjoy the hard work.
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  • परित्राणाय साधूनां विनाशाय च दुष्कृताम् ।
    धर्मसंस्थापनार्थाय सम्भवामि युगे युगे |
    IRS(Customs and Central Excise) Probationer
    AIR-412 CSE 2014 | AIR - 450 CSE 2016 |
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  • Surcharge is a charge on any tax, charged on the tax already paid. We usually pay it on electricity bill It goes into the consolidated fund of India. That way the govt can spend it on any item it deems fit.

    On the other hand, a cess is always preceded by the item, like education cess, irrigation cess, etc.

    For example, right now in Service Tax, the provision is of 12% + Education cess + Higher Education Cess.

    Now suppose the value of taxable service is Rs.100. Service tax @10% will be Rs.10 and Education Cess @2% of the Service Tax will be Rs.0.20 and Secondary & Higher Education Cess @1% of the service tax will be 0.10.
    Good reply @witwiki

    I would like to add here, (which is implicit in witwiki's answer), that the difference is that while surcharge goes to consolidated fund of India and can be used for any purpose, a cess is earmarked for a particular purpose only, as pointed out in the example given by witwiki.
    Isn't cess charged on taxable income plus surcharge?? i.e it should be Rs 0.22+ Rs 0.11

    yes cess on (Tax + Surcharge).
    चरैवेति चरैवेति - Johnnie Walker
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    1. Consider one's Gross Income to be Rs G
    2. Now, some Exemption is allowed ( Charity, PF, pm relief fund etc) say Rs. Ex
    3. Now, Taxable Income = Rs G - Ex = Rs. 1L
    4. Now, according to slab(10%,20%, 30% whatever be it) : %tax will be charged . let that amount be 1L i.e. Rs 1L should be taken from the entity(if no further surcharge, cess etc.)
    5. Now, post levying Surcharge(@12%) the amount tax calculates out to be Rs. 1.2L
    6. Now, Cess is calculated on (Tax + Surcharge) i.e. if education cess is 3% then final amount payable as tax = Rs. 1L + 12k + 3360 (3360 being cess = 3% of Rs. 1.2L)
    Similarity b/w Surcharge & Cess
    Finance commission cannot recommend Center to share it with states. i.e. these are "for purposes of the Union".

    Differences b/w Surcharge & Cess :
    Surcharge :

    • Not for any specific purpose
    • According to A271, surcharges shall form part of CFI.
    • Surcharge is calculated on tax( which in turn is calculated on Taxable Income)
    Cess :

    • It's exclusively for specific purpose, say education, farmer welfare, infrastructure development, Mid day meal etc. Recenlty cess on coal has been imposed to fund for clean energy alternatives.
    • The proceed is parked in a separate reserve fund in the Public Account of India. (but not necessarily, see : Education cess not to figure in public accounts )
    • Cess is calculated on Tax+Surcharge.

    चरैवेति चरैवेति - Johnnie Walker
    ·

    1. Consider one's Gross Income to be Rs G
    2. Now, some Exemption is allowed ( Charity, PF, pm relief fund etc) say Rs. Ex
    3. Now, Taxable Income = Rs G - Ex = Rs. 1L
    4. Now, according to slab(10%,20%, 30% whatever be it) : %tax will be charged . let that amount be 1L i.e. Rs 1L should be taken from the entity(if no further surcharge, cess etc.)
    5. Now, post levying Surcharge(@12%) the amount tax calculates out to be Rs. 1.2L
    6. Now, Cess is calculated on (Tax + Surcharge) i.e. if education cess is 3% then final amount payable as tax = Rs. 1L + 12k + 3360 (3360 being cess = 3% of Rs. 1.2L)
    Similarity b/w Surcharge & Cess
    Finance commission cannot recommend Center to share it with states. i.e. these are "for purposes of the Union".

    Differences b/w Surcharge & Cess :
    Surcharge :

    • Not for any specific purpose
    • According to A271, surcharges shall form part of CFI.
    • Surcharge is calculated on tax( which in turn is calculated on Taxable Income)
    Cess :

    • It's exclusively for specific purpose, say education, farmer welfare, infrastructure development, Mid day meal etc. Recenlty cess on coal has been imposed to fund for clean energy alternatives.
    • The proceed is parked in a separate reserve fund in the Public Account of India. (but not necessarily, see : Education cess not to figure in public accounts )
    • Cess is calculated on Tax+Surcharge.

    I guess cess fund is credited in CFI. Please clarify...
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  • There is a document by CBEC which give details about Swacch Bharat Cess (http://www.cbec.gov.in/resources//htdocs-cbec/press-release/faq-sbc.pdf;jsessionid=8F9ECA9D78C24A97BF10B4BD75161F18) which mention that cess is first credited in CFI than after appropriation made by parliament, it is utlised by govt.
    Also Cess can be levied in various ways:
    1) It may be on taxable income as mentioned above. So in that case 14% service tax with 0.5% cess will make total tax 14.5%
    2) It can be tax on tax. i.e if tax is say Rs 10,000 and cess is 1% than 1% will be levied on this tax and hence it will be different from above.
    3) It can be flat amount. For ex Clean Environment Tax of Rs 400 on coal and lignite.
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  • @RossGellar

    You are right

    Just now I also read the same.. ..proceeds from Krishi kalyan cess will be first credited to CFI and then via appropriation by Parliament will be utilised

    Moreover Krishi kalyan surcharge introduced recently is to be used for specific purpose

    Now what to conclude from these??
    "You can't stop the waves, but you can learn to surf"
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  • MD47 said:

    @RossGellar

    You are right

    Just now I also read the same.. ..proceeds from Krishi kalyan cess will be first credited to CFI and then via appropriation by Parliament will be utilised

    Moreover Krishi kalyan surcharge introduced recently is to be used for specific purpose

    Now what to conclude from these??

    Ideally Cess should be credited to CFI. As per definition of CAG, all revenue by way of taxation is credited to CFI whereas public money is credited to Public Accounts in which govt act as merely a banker. Further subhead under Public accounts has Saving certificates, Reserve funds, Deposits and advances, suspense and miscellaneous, remittances and cash balances - nothing similar to cess. So ideally cess should be credited to CFI alongwith revenue subhead (which includes taxation).
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  • OK Bhai but what about purpose specific surcharge ??
    @RossGellar
    "You can't stop the waves, but you can learn to surf"
    ·
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