The Finance Ministry has proposed three new cesses in the Union Budget. Proceeds from the proposed Krishi Kalyan Cess – 0.5 per cent on all taxable services – would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers.
The cess, which will come into force from June 1, 2016, is expected to raise ₹5,000 crore for the Centre in 2016-17. An input tax credit will be available for payment of this cess.
Incentivising clean airExpressing concern over the pollution and traffic in Indian cities, the Finance Minister also proposed an infrastructure cess of 1 per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars meeting certain specifications and 4 per cent on other higher engine capacity vehicles and special utility vehicles (SUVs). The government expects to raise ₹3,000 crore next year through this cess.
The Finance Minister also proposed to rename the ‘Clean Energy Cess’ levied on coal, lignite and peat as ‘Clean Environment Cess’ and simultaneously increased its rate from Rs 200/tonne to Rs 400/tonne. Through this cess, the government expects to raise ₹26,148.2 crore, up from ₹12,623 crore this year.
Poor performers to goThe Finance Minister also proposed to abolish 13 cesses, which generate revenues of less than ₹50 crore per year. According to data in the budget documents, cesses raising below ₹50 crore in 2015-16 (revised estimates) includes education (₹44 crore), secondary and higher education cess (₹22 crore), salt (₹5 crore), mica (₹2.73 crore), iron, manganese and chrome ore (₹16.7 crore), limestone and dolomite (₹15.98 crore), cine workers (₹1.93 crore), cess under other accounts (₹9 crore), and cess collection on textiles and textile machinery (₹1 crore). Together, they amount to ₹118.34 crore.