The government may introduce a coronavirus cess or surcharge on individual taxpayers in the upcoming budget, experts opine. Budget 2021-22 will be presented on February 1 by Finance Minister Nirmala Sitharaman, which will be the third Budget of the Modi 2.0 government.
According to CA Aditya M Agarwal, Partner, Mahesh K Agarwal & Co and Secretary, Professional Times, Budget 2021 comes with its own challenges for the country.
"On one hand the government has been struggling with poor revenue collection and, while on the other, it has a pressure to help and sustain the people especially the MSME and individual taxpayers who are adversely affected as they are struggling due to job losses and salary cuts. Additionally, the centre has started with the first phase of the nationwide COVID-19 vaccine drive and the entire cost of immunisation including the money spent on meals and other relief assistance during corona times will add on to the government's pressure of this huge revenue deficit to manage," says Agarwal.
Keeping the above in mind, Agarwal adds, the possibility of introducing a COVID-19 cess in this budget is quite high. The cess could be applicable on individuals in the higher income bracket or businesses with specified turnovers.
Amit Maheshwari, Tax Partner, AKM Global -- a consulting firm -- seconds Agarwal's views.
"The Centre is likely to introduce such cess in Budget 2021 to bear the cost of COVID-19 medical programmes, COVID-19 kits, health tests and vaccination programmes, which will be increased this year especially when we are one of the populated countries in the world and then will get abolished once the purpose is served within a year or two," he opines.
A cess is mostly levied to generate revenue for a specific purpose. It gets rolled back once the purpose is served.
Article 270 of the Constitution of India, Agarwal explains, grants the power to the Union to raise its revenue by levying cess, but the same has to be earmarked and has to be for a specific purpose only and acts as an additional tax besides the existing tax paid.
"An important point to note here is the fact that these central cess collections aren’t shared with states under revenue devolution. And thus, the Centre can prefer a cess to generate funds quickly instead of raising taxes in the upcoming budget," he adds.
(With inputs from agencies)