Cess and Surcharge Collections Estimated to Grow 9.4% to ₹5.91 Lakh Crore in FY26: Centre

The central government has projected ₹5.91 lakh crore in cess and surcharge collections for FY26, signalling a 9.4% rise compared to FY25. This revenue is expected to finance key central schemes without revenue sharing with states.

FY26 Cess and Surcharge Revenue Outlook

According to data presented in Parliament, for FY26, cess collection is projected at ₹4.18 lakh crore while surcharge revenue is pinned at ₹1.72 lakh crore. These figures mark a significant jump from FY25, where cess and surcharge stood at ₹3.87 lakh crore and ₹1.53 lakh crore, respectively. The combined increase of 9.43% underlines the Centre’s continued reliance on such levies to fund Union-specific activities.

Role and Allocation of Cess and Surcharge

As per Article 271 of the Constitution, the Centre uses cess and surcharge to fund specific requirements, mostly for centrally sponsored schemes. These funds do not enter the divisible tax pool, and therefore, states do not receive a share. This distinction often draws criticism from state governments, especially those led by opposition parties, calling for a change in tax devolution practices.

Expenditure Trends in Health and Education Cess

In FY25, ₹83,071 crore was collected through the health and education cess, while the government spent ₹87,199 crore from the same pool. This pattern has remained consistent over the last three years, with expenditures slightly exceeding collections.

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Scope of Current Cess and Surcharge Mechanisms

At present, eight distinct cesses are operational, including GST compensation cess, health and education cess, and cess on crude oil. Surcharges are applicable to corporate tax, income tax, and customs via the social welfare surcharge. Their growing usage reflects the Centre’s strategy to meet specific expenditures without expanding general tax rates.

Conclusion

The Centre's projected 9.4% rise in cess and surcharge collections to ₹5.91 lakh crore for FY26 indicates an increasing focus on dedicated levies for Union needs. However, the exclusion of these funds from revenue sharing continues to spark debates over fiscal federalism.

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