Budget 2026: All about cess, why it is imposed, its types and more. Details here

Budget 2026 | Union Finance Minister Nirmala Sitharaman’s presented her ninth consecutive Budget in the Parliament on February 1 2026. The Finance Minister emphasised that the government has consistently chosen reform over rhetoric and addressed global uncertainty.

With budget being presented, attention is turning to cess, a key contributor to government revenues, especially amid a packed assembly election calendar in 2026.

What is cess?

A cess is an additional levy imposed by the Government of India on existing taxes to raise funds for clearly defined objectives. Unlike regular taxes, a cess is not a permanent source of revenue and is generally introduced to meet a particular funding requirement. Once the objective is fulfilled, it may be withdrawn.

The proceeds from a cess are credited to the Consolidated Fund of India (CFI) but are ring-fenced, meaning they can be used only for the purpose for which the cess was levied. Governments often rely on cess to direct resources towards priority sectors or specific social and developmental initiatives.

Types of cess levied by the Government of India 

• A road and infrastructure cess is specifically earmarked for the development and maintenance of transport infrastructure.
• Health and Education Cess is charged at 4% on the total income tax payable, including any applicable surcharge. It supports the government’s efforts to strengthen public healthcare systems and improve access to quality education at all levels. This cess applies to all categories of assessees, including individuals, HUFs, firms, companies, co-operative societies, and local authorities. 
• Introduced in the 2018 Union Budget by Arun Jaitley, the Health and Education Cess primarily benefits the underprivileged and economically weaker sections by funding health schemes, educational infrastructure, digital learning initiatives, and teacher recruitment.
• Road and Infrastructure Cess is imposed under the Finance Act, 2018 on fuels like petrol and high-speed diesel to finance road development. 
• The  GST Compensation Cess is levied on certain goods to compensate states for revenue shortfalls arising from GST implementation as determined by the GST Council. 
• The Construction Workers’ Welfare Cess is collected at 1% of construction cost to fund welfare measures for construction workers. 

Other types of cess include a cess on domestically produced crude oil and natural gas to support the oil industry; and the National Calamity Contingent Duty (NCCD), imposed on selected goods to fund disaster-related expenditures.