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Increase in Education Cess Shifts Responsibility on Tax Payer: Experts

This increase will enable the government to collect an estimated additional amount of Rs 11,000 crore for the health & education schemes announced in the Union Budget 2018-19.

Eram Agha | News18.comEramAgha

Updated:February 1, 2018, 8:22 PM IST
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Increase in Education Cess Shifts Responsibility on Tax Payer: Experts
This increase will enable the government to collect an estimated additional amount of Rs 11,000 crore for the health & education schemes announced in the Union Budget 2018-19.
New Delhi: The central government increased ‘health and education cess’ by one percent to fund health and education sector schemes in the Union Budget 2018-19.

This increase will enable the government to collect an estimated additional amount of Rs 11,000 crore for the health & education schemes announced in the Union Budget 2018-19.

Experts say that by doing this the government is shifting the responsibility on the tax payers to fund education and health needs. There is a 3% cess on personal income tax and corporation tax consisting of 2% cess for primary education and 1% cess for secondary and higher education.

FM Jaitley announced in his speech: “In order to take care of the needs of education and health of BPL and rural families, I have announced programs. To fund this, I propose to increase the cess by one percent.”

“The existing three per cent education cess will be replaced by a four percent ‘health and education cess’ to be levied on the tax payable. This will enable the government to collect an estimated additional amount of 11,000 crores”, he added.

Parth J Shah, President of the Centre for Civil Society in India, said that his institute’s Sajad Santhosh conducted a study “Trends in India’s Education Budgeting” which showed how much burden the cess was carrying on itself to fund education. “The education cess is not earmarked for only education, which means this is just an extra tax revenue for the government, so even if we assume money will be spent on education, there is no guarantee that government will not give less money from the general fund,” said Shah.

The student’s budget. (Image: News18 Creative)

The student’s budget. (Image: News18 Creative)

Education Cess at 2 percent on all major Central Taxes through the Finance (No.2) Act, 2004, Prarambhik Shiksha Kosh (PSK) was established with effect from 2005 as a dedicated non-lapsable fund to receive the proceeds of the Education Cess.

The 2015 study reported that in the National Program of Mid-Day Meals in Schools “Rs 6,927 crores (58.55 percent of the total budgetary allocation) allocated for the Mid-day Meals Program was under Prarambhik Shiksha Kosh in 2012-13, which increased to Rs 7,976 crore (60.35 percent of the total budgetary allocation) in 2013-14 and 8,734 crore (66.09 percent of the total budgetary allocation) in 2014-15.”

The total amount allocated for the Mid-day Meals Program had increased from Rs 11,830 crore in 2012-13 to Rs 13,215 crore in 2013-14 and remained the same in that year’s budget.

Similarly, it showed that the total amount allocated for Sarva Shiksha Abhiyan in 2012-13 was Rs 25,555 crore, with 57.69 percent (Rs14,743 crores) of the funding coming from the Prarambhik Shiksha Kosh (PSK) fund. The allocation increased to Rs 27,258 crores in 2013-14 with the contribution from PSK also increasing to 60.36 percent (Rs 16,453 crores). The total increase in 2014-15 was to Rs 28,635 crore, with the PSK share being 65.79 percent (Rs 18,841 crore).

Ambarish Rai (National Convenor, RTE Forum) recalled the study done by Centre for Budget and Governance Accountability that said, “Sarva Shiksha Abhiyan (SSA), the vehicle of RTE, received Rs 23,500 crore in 2017-18. 62 percent of this amount was financed through the education cess (Prarambhik Shiksha Kosh), 32 percent through Gross Budgetary support (GBS) and six percent through externally aided projects.”

Rai said, “Cess was started to fill in the gaps – but we need more allocation from the GDP to strengthen our education sector. By collecting higher cess government is declining its own responsibility to fund education and health schemes through the revenue. The responsibility is being shifted to the taxpayer.”

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| Edited by: Tarun Bhardwaj
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