India may be considering a COVID cess on high income earners — aside from more levy on fuel

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India may be considering a COVID cess on high income earners — aside from more levy on fuel
Representational image.Pixabay
  • The government is considering a COVID cess to help increase revenue ahead of Budget 2021. A call on the new cess or surcharge is likely to be taken in the coming weeks.
  • According to an ET report, preliminary talks on revenue-raising measures include a cess on high income earners, as well as additional levy on fuel.
  • States have been facing pressure in revenues because of economic slowdown and corporate tax cuts, which means that the government is stretched to meet its spending needs.
  • The first phase of COVID-19 vaccine rollout will cost the government ₹21,000 to ₹27,000 crore.
Ahead of Budget 2021, India is mulling imposition of an additional COVID cess or surcharge on high income earners. This could be to meet the increased expenditure due to the pandemic and the upcoming vaccination drive.

According to an ET report, preliminary talks on revenue-raising measures include a cess on high income earners, as well as additional levy on fuel. A call on the new COVID cess will likely be taken closer to February 1, when the budget is scheduled to be announced.

If the government implements the COVID cess, it will be the latest in line of measures to boost revenue at a time when it has implemented several policies that either reduce government collections or increase its spendings.

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India may be considering a COVID cess on high income earners — aside from more levy on fuel
GST collections plummeted during peak of COVID-19CBIC / Business Insider India / Flourish

States have been facing pressure in revenues because of economic slowdown and corporate tax cuts, which means that the government is stretched to meet its spending needs. Goods and services tax (GST) collections have also struggled for a good part of 2020, in large part due to the pandemic and lockdown. Further, India’s growth rate is expected to contract by up to 7.7% while fiscal deficit is projected to rise.

As per a PTI report, India has already crossed 135% of its fiscal deficit targets for FY21 in December.

India may be considering a COVID cess on high income earners — aside from more levy on fuel
India's fiscal deficit since 2009-10Economic Survey / Business Insider India / Flourish

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According to the ET report, the preliminary discussions have revolved around a cess on high-income earners along with some increase in indirect taxes. There has also been a proposal to add a cess to excise on petrol and diesel on top of custom duties. A cess is a good way for the centre to raise funds as central cess collections are not shared with the states.


The industry in its recommendations on the budget has asked that no new taxes should be levied as the economy is already under stress due to the pandemic. Experts too agree that the timing is not right.

The Indian Revenue Service Association (IRSA) had last year suggested the imposition of a one-time COVID relief cess on the super-rich to raise funds amid the pandemic.
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COVID-19 vaccine rollout to cost ₹56,000 to ₹72,000 crore

As per an SBI Research report, the first phase of the COVID-19 vaccination drive that begins from January 16 will cost the government ₹21,000 to ₹27,000 crore. The second phase is expected to cost an additional ₹35,000 to ₹45,000 crore.

The government intends to vaccinate 30 crore people in the first phase and an additional 50 crore people in the second phase.

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While the cost of vaccines will be borne by the central government, the state governments will bear distribution, personnel training and logistic costs.

Jharkhand has imposed a COVID cess on minerals and Punjab, Haryana and Delhi have imposed additional taxes on liquor to meet the increased expenditure and reduced revenues.

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