economics medium MCQ

What is the fundamental difference between a 'Cess' and a 'Surcharge' in the Indian tax system?

  1. Cess is direct, Surcharge is indirect
  2. Cess is levied for a specific purpose, Surcharge is a general tax on tax
  3. Cess is shared with states, Surcharge is not
  4. Both B and C

Answer: Both B and C

A cess is earmarked for a specific developmental purpose (like education or health) and ceases when the purpose is fulfilled. A surcharge is an additional tax on the existing tax of high-income earners. Crucially, the proceeds of both cess and surcharge are retained exclusively by the Centre and are not shared with states via the Finance Commission.

Topic Public Finance - Taxation
Exam Relevance UPSC Prelims, SSC CGL, Banking
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