Q. Consider the following statements:
1.All taxpayers are required to pay cess, but surcharge applies only to those earning above a specific income level.
2.Revenue collected through cess and surcharges by the central government is shared with the states.
Which of the statement(s) given above is/are correct?
Explanation –
Statement 1 is correct. Cess is levied on all taxpayers, regardless of their income level, as it is a tax on tax meant for specific purposes like education or health. Whereas, a surcharge is only applicable to high-income earners, typically those with an income above a certain threshold. Surcharge is for general revenue while cess is for specific purposes. Cess is typically temporary, while surcharge has no defined end date.
Statement 2 is incorrect. Revenue collected through cess and surcharges is not shared with the states. These funds are retained by the central government and do not form part of the divisible pool of taxes that are distributed among the states. Currently, surcharges and cess constitute about one-fifth of the Union’s Gross Tax Revenue.
Source: The Hindu
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