Consider the following statements:

1. The revenues generated from cess is credited into Consolidated Fund of India. 

2. Agriculture infrastructure and development cess (AIDC) is levied on crude palm oil, coal and lignite. 

3. The proceeds collected through cess by the Union government must be shared with the states. 

Which of the statements given above is/are correct? 

a) 1 only 

b) 1 and 2 only 

c) 2 and 3 only 

d) 1, 2 and 3

Solution: 

• Cess is a form of tax charged/levied over and above the base tax liability of a taxpayer. 
• The revenue coming from cess is first credited to the Consolidated Fund of India and the government may then, after due appropriation from Parliament, utilize it for the specified purpose. 
• On customs side the items covered under AIDC are gold, silver, alcohol beverages, crude palm oil, crude soyabean and sunflower oil, apples, coal, lignite and peat specified fertilizers, peas, kabuli chana, bengal gram, lentil and cotton. 
• On the excise side, AIDC of Rs. 2.5 per litre has been imposed on petrol and Rs. 4 per litre on diesel. 
• The major difference between central taxes and cess is that the proceeds of a cess may or may not be shared with the state governments, while that of taxes have to be shared. 
• Article 270 of the Constitution allows cess to be excluded from the purview of the divisible pool of taxes that the Union government must share with the States.

Ans: (b)