In itself, the Swachh Bharat cess doesn’t look like too much of an imposition—50 paise on every Rs 100 of transactions, which is a fourth of what finance minister Arun Jaitley had taken Parliament’s permission to levy to clean up India. And though there has been the unfortunate case of the oil industry cess of Rs 1.3 lakh crore that has been collected since 1992 and not been transferred to the oil ministry, the important thing about cesses is that they are earmarked for a project, and cannot be used to fund the general budget. In the case of the universal service obligation (USO) tax that is levied on all telephone budgets and on which Rs 68,176 crore has been collected so far, a very large share of the money has disappeared into the consolidated fund of India and is not available for the development of the telecom industry. In contrast, the Rs 43,100 crore that is to be collected from the road cess this year will only be used for funding roads construction; ditto for the Rs 28,489 crore that is to be collected for education by way of a cess.
There is, however, a fundamental problem with cesses like the Swachh Bharat one, apart from the fact that they add to the consumer burden—Rs 3,800 crore in just the remaining part of the fiscal is to accrue from Swachh Bharat. Unlike taxes collected by the central government, cesses and surcharges are not part of the divisible pool that is shared with state governments. That, in a fundamental sense, goes against the concept of cooperative federalism which the ruling BJP government has been promoting ever since it came to power. Also, once a cess is imposed, it never gets withdrawn. The Salt Cess of 1953 still continues though it earned a meagre R3.85 crore in FY15. Then there are the beedi workers cess (1976), cine workers cess (1981) and even, if you please, an R&D cess (1986). Over the years, the share of cesses and surcharges as a proportion of the total tax collections has been on the rise—from 11.9% in FY11 to 16.6% in the budgetary estimates for FY16—that is a large, and increasing, share of the tax pie that is not being shared with the states.