To push growth and the economy ahead, the centre is likely to bring some policies to raise revenues
A COVID cess may be levied only on the higher income groups
The government may introduce a coronavirus cess or surcharge on individual taxpayers in the upcoming budget. A COVID cess may be levied on the higher income groups, said experts. Finance Minister Nirmala Sitharaman will present the Union Budget on 1 February, 2021.
The COVID-19 pandemic has severely disrupted the economies across the globe in unprecedented ways. To provide relief to pandemic-battered sector, the government announced Atmanirbhar Bharat stimulus package. From extending deadlines for for filing tax returns to reduction in specified withholding tax rates, several measures were adopted to protect the economy. The centre also introduced the LTC cash voucher scheme to boost spending. To push growth and the economy ahead, the centre is likely to bring some policies to raise revenues.
"2020 has been a challenging year for the government and taxpayers alike. Government has been struggling with poor revenue collections, while on the other hand there is increased pressure to make investments in infrastructure projects to generate jobs and push the economy ahead," said Archit Gupta, Founder and chief executive officer, ClearTax.
Moreover, the centre had started the first phase of nationwide COVID-19 vaccine drive this month. The entire cost of immunization drive will be borne by the government. "With this backdrop, it would be unfair to expect any tax reliefs. However, the government may choose to bring in a covid cess or some other similar cess of between 2-4%," said Gupta.
"This cess may be made applicable to higher income brackets to cover for the money spent on meals and other assistance to the poorest during coronavirus as well as the costs involved to vaccinate everyone in 2021 and further. It is likely that businesses may face this cess if not individuals," he added.
A cess is a form of tax levied by the government on tax with specific purposes till the time the government gets enough money for that purpose. A cess is imposed as an additional tax besides the existing tax.
On the imposition of COVID cess, Pratik Jain, who leads the indirect tax practice at PwC India, said, "My sense is that if they want to collect an additional amount of money and if they fund expenses for vaccines then it would be broad-based and not limited to few products and would be applied on base value and not on tax component."