Union government’s cess and surcharge surge sparks concerns over State revenue losses

The share of cess and surcharge collections in gross tax revenue has risen sharply from 6.53 percent in 2013-14 to 10.97 percent by 2025-26. This significant increase has raised concerns among States, which depend on shared tax revenues to finance essential development projects and public services.

Hyderabad: Over the past decade, the Union government’s cess and surcharge collections, which are not shared with States, have witnessed a dramatic rise, leading to significant revenue losses for State. Data reveals that these levies, which stood at around Rs 1.08 lakh crore in 2013-14, have surged to a staggering Rs 5.56 lakh crore by 2025-26.

Thus, the percentage of cess and surcharge collections in gross tax revenue have increased from 6.53 per cent in 2013-14 to 10.97 per cent by 2025-26. This sharp increase has sparked concerns among States, which rely on shared tax revenues to fund critical development projects and public services.

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Taking to X, former Finance Minister and BRS MLA T Harish Rao argued that the growing reliance on cess and surcharge, which remain outside the divisible tax pool, undermines the principles of fiscal federalism and leaves States financially strained. “This trend has led to substantial revenue losses for the States, widening the imbalance between the Centre and the States” he posted, suggesting for a reevaluation of the revenue-sharing mechanism to ensure equitable distribution of resources.