Decoding Budget 2021: How the new Agri Infra cess will not affect consumer

New Delhi, Feb 02: In a significant development, Union Finance Minister Nirmala Sitharaman, in her Budget 2021 speech, has announced imposition of Agriculture Infrastructure and Development Cess (AIDC) on certain items, including petrol, diesel, gold and some imported agricultural products.
The agricultural infrastructure development cess will be applicable from February 2, 2021.

Sitharaman also said that care has been taken not to put additional burden on consumers on most items.

There is an immediate need to improve agricultural infrastructure so that we produce more, while also conserving and processing agricultural output efficiently, the minister said in her Budget Speech in Lok Sabha.

What does it mean and why this accounting change?

A cess is a tax on tax, levied by the government for a specific purpose. It is levied on the tax payable and not on the taxable income. In a sense, for the taxpayer, it is equivalent to a surcharge on tax. A cess can be levied on both direct and indirect taxes.

As per the Budget documents, AIDC of Rs 2.5 per litre has been imposed on petrol and Rs 4 per litre on diesel. Overall, there would be no additional burden on the consumer.

Consequent to imposition of AIDC on petrol and diesel, the Basic Excise Duty (BED) and Special Additional Excise Duty (SAED) rates have been reduced on them so that overall consumer does not bear any additional burden.

Consequently, unbranded petrol and diesel will attract basic excise duty of Rs 1.4, and Rs 1.8 per litre, respectively. The SAED on unbranded petrol and diesel shall be Rs 11 and Rs 8 per litre, respectively. Similar changes have also been made for branded petrol and diesel. Net net the consumer does not have to pay anything extra.

The cess on import of ''gold and silver'' will be 2.5 per cent, alcoholic beverages (100 per cent), crude palm oil (17.5 per cent), apples (35 per cent), ''coal, lignite and peat'' (1.5 per cent), fertilizers, including urea (5 per cent), and cotton (5 per cent).