Union Budget 2021 | Will there be an additional Covid Cess or not?

Prachi Bansal | Last updated: 02 February 2021

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Quick Summary

The Union Budget 2021 might introduce a Covid Cess due to the significant financial strain on the government caused by the pandemic. This special cess, levied for a specific purpose, would not be shared with states and would help fund expenses like vaccine rollout, infrastructure, and support for MSMEs. Several states have already implemented additional cesses to manage their pandemic-related costs.

There is a high possibility of an introduction of a Covid Cess because we all know that the government has almost hit rock bottom due to the pandemic. Millions have lost jobs and the government is almost in a state of recession due to the state of which the pandemic got us. It is getting very difficult even for the government to operate in such a tight budget and it is most likely that a Covid Cess will be introduced in the new budget which is to be introduced tomorrow.

Article 270 of The Constitution of India states that the Parliament can levy cess for a specific purpose under a law made by it. The Central cess collections will therefore not be shared or allotted to any states under revenue devolution. It is all given to the government and the government uses it as a part of its expenditures.

The final decision would be known tomorrow (1st February 2021) of whether or not a cess or surcharge will be introduced in the budget by the Finance and the Union Minister. Currently there is a cess of 4% which was introduced in the Union Budget 2018, by then Finance minister Arun Jaitley for health and education facilities.

Covid Cess in Union Budget 2021: What to Expect

There is an estimated expenditure of around Rs. 60,000-65,000 on the vaccine rollout including the logistics. This is a huge new expenditure due to the pandemic which will require help from the public in the form of introduction of Covid Cess. Besides the government is also planning an additional spending on the infrastructure, the rural economy, MSMEs and Atmanirbhar Bharat Rozgar Yojana in the next financial year to support the economy.

Many states also introduced an additional cess as the pandemic broke out to meet the expenses of the particular states. Punjab imposed more tax on liquor, Jharkhand introduced taxes on minerals, Delhi also introduced cess on liquor for a limited period of time(which was later withdrawn but VAT was raised)

According to the scenario an Introduction of covid cess is the need of the hour and the government must introduce a minimal amount of CESS for the public to pay additionally. The contribution of each and every taxpayer will count as the government is also in a very tough state and every contribution as an additional Cess could make a difference.

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FAQ :

A Covid Cess is an additional tax that could be introduced by the government for a specific purpose, such as funding pandemic-related expenses like vaccine rollout and economic support.

The government may introduce a Covid Cess to help cover the significant expenditures incurred due to the pandemic, including vaccine rollout costs, infrastructure development, and support for the rural economy and MSMEs.

No, according to Article 270 of the Constitution of India, central cess collections are not shared or allotted to states under revenue devolution; they are used by the government for its expenditures.

Yes, many states introduced additional cesses or taxes on items like liquor and minerals to meet their specific pandemic-related expenses.

The estimated expenditure for vaccine rollout, including logistics, is around Rs. 60,000-65,000.