Budget 2021: How will govt fund COVID-19 vaccination? There's a cess coming!

The Centre may announce a coronavirus cess in Budget 2021, scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1.

In the wake of COVID-19 pandemic, the government is mulling the cess or surcharge to finance additional spending ahead of the budget. The government held initial talks on revenue-sharing measures, however, a definitive decision on whether to levy it in the form of a cess or surcharge will be taken closer to February 1, when the budget is announced.

"Proposal for a cess has been discussed," a source told The Economic Times. Although the industry, in its recommendations, has sought no new taxes as the economy is already under stress, experts have also controverted the idea, saying the timing for such a levy wasn't right.

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Preliminary discussions centered around a small cess or surcharge on high-income earners besides some indirect taxes, the report stated, adding that another suggestion being made was to add a cess to excise duty on petroleum and diesel or on top of customs duties.

However, the Centre cannot unilaterally impose a cess on it as the GST (goods and services tax) is administered by the GST Council.

Meanwhile, according to private estimates, the total expenditure on the vaccine rollout, comprising logistics amounts to Rs 60,000-65,000 crore.

As India will start its vaccination drive on January 16, the Centre may have to bear the cost of it, even though distribution, logistics, and manpower training are being taken care of by the states.

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Furthermore, the government is also likely to incur additional spending on infrastructure, rural economy and the Atmanirbhar Bharat Rozgar Yojana FY22 to cushion the economy.

The Centre, according to the report, has also favoured a cess to generate funds speedily rather than raising taxes as central cess collections are not shared with states under revenue decentralisation.