In conversation with Ms Ashrita Prasad Kotha

Ashrita Prasad Kotha is a doctoral candidate (Teaching and Research Associate) at WU, Vienna. She completed her masters in law from the University of Oxford as a KC Mahindra Scholar.  During 2014-2019, Ashrita was an Assistant Professor where she taught tax law and policy at Jindal Global Law School, in India. She has given guest lectures on international taxation and has advised the Fifteenth Finance Commission of India on earmarked taxes. She received the Abe Greenbaum Research Fellowship by UNSW, Sydney in 2018. 

What is Cess?

Cess is a form of tax that is charged over and above the base tax liability of a taxpayer. It is usually levied when the State or Central Government looks to raise funds for a specific purpose. The government can impose cess for purposes such as disaster relief, generating funds for cleaning rivers, etc. Remember Swatch Bharat cess? Or clean energy cess? These cesses were in addition to service tax, which has now been subsumed under GST. In this blog post, we are going to focus on Krishi Kalyan Cess (KKC). 

Krishi Kalyan Cess (KKC)

KKC was imposed by the Central Government on all services, which were liable to service tax, at the rate of 0.5%. The cess was in effect between 2016 and 2017. This means that whatever you purchased in that year, from a bar of soap to a packet of chips to lunch in your favourite restaurant, you and each one of us paid 0.5% of our bill amount as KKC. Out of every Rs 100 you spent, 50 paise went to the cess Kosh (fund). The purpose of the cess was to raise funds to finance the improvement of agriculture and the welfare of farmers. As is usually the case with cesses, especially the ones that are part of indirect taxes, the burden in the case of KKC was shifted to the consumer where either we pay higher or get lesser value for amount paid.

To understand more about cesses and agriculture cess, in particular, we interviewed Ms Ashrita Prasad Kotha. According to her, there is mention of cess in the Indian Constitution (ref: Article 270). She says “That may be owing to the fact that a cess, as clarified by judicial precedents, is either a tax or a fee depending on the specific facts. The unique feature of cess is that it raises revenue for an earmarked purpose. Also, union cesses (cesses levied by the Central Government) are not required to be shared with State Governments”.

Ashrita talks at length about some of the flip sides of cess. She says “Recent enquiries into the usage of funds collected under the head of the cess reveal a lack of accountability”. She adds that the initiatives for which cess is collected are not clearly defined in the law. For example, Krishi Kalyan Cess was for financing the improvement of agriculture and welfare of farmers. But the specific details are nowhere to be found in the public domain. What are the deliverables for the Government? What were the 6 months, 1 year, 2-year goals? Unclear. There was a lack of transparency and no uniform standards for earmarking. Additionally, the track record of utilisation was quite poor. For example, a recent RTI revealed that Government collected more than Rs 10,000 crores during the time it was implemented (2016-17), out of which only Rs 3,596 crore was credited to Krishi Kalyan Kosh. There were also allegations that cess was charged from the consumers even after it was abolished. The Agriculture Ministry has claimed that majority of the cess fund was spent on PM Fasal Bima Yojana and other subsidies to farmers. However, this is very ambiguous as, despite extensive research, we were unable to find any detailed audit document of the KKC. Actual utilisation is still a mystery and it is not clear where the funds have been spent.

Policy recommendations

Ashrita was part of the expert panel that advised the 15th Finance Commission on cesses and surcharges. One of her recommendations was that greater checks and balances are needed to facilitate this process. The laws imposing cess must be specific and clear to all stakeholders; there should be a periodic review of the laws and earmarking requirements must be standardised; and as and when pre-specified funds are collected, the cess must be repealed. Most importantly, a record of how the money was spent must be made publicly available.

Final Thoughts

Agriculture cess isn’t necessarily a bad thing. In fact, if implemented properly, it has the financial power to bring some much-needed changes in the sector which contributes 16% to the GDP. But how ethical is it to charge common people in the name of cess without any explanation about how it is spent? If the taxpayers' money is not spent for the pre-specified purpose and/or is diverted, it declines the economy further, as the additional tax is an extra burden on the real incomes without any accompanying gain in the targeted sector. 

You can read the Report to the Fifteenth Finance Commission at:



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