Therefore, to increase its share of revenues, the Centre decided to make the most of the cess regime, because money collected through cesses is not shared with the states.
Says Sunil Kumar Sinha, Principal Economist, India Ratings: "Money collected through many cesses do not have designated pools, and we do not know if they are actually spent for the purpose they were collected for." The CAG, in its report released in December, had also echoed similar views, pointing out that in some cases, even the CAG couldn't figure out what was happening to the unutilised funds.
Economist Omkar Goswami, who is the Chairperson of Corporate and Economic Research Group Advisory, explains: "I truly disagree, except in rare instances, of using cesses for raising money.
Now that the Centre has made up its mind, we will probably have to wait for the CAG report of 2017 to know whether the government lived up to its promise and used the cesses for the purpose they were levied for.
Apart from being an additional burden on taxpayers, cesses skew the actual share of central taxes that states get.
Increasing cesses, it could be argued, negates this higher share for the states.
The single biggest chunk of cesses is on petroleum products and crude oil.