ROAD AND INFRASTRUCTURE CESS

[Mr. M. GOVINDARAJAN]

Introduction

The road cess was originally created in 1998-99 as a non-lapsable, dedicated fund to make roads. It was collected from users of diesel and petrol by levying an extra cess on the amount of fuel they bought.  The non-lapsable pool of funds was subsequently adopted as a law called the Central Road Fund (CRF) Act 2000, with a levy of just one rupee a liter each on diesel and petrol. The fund was used for various kinds of road construction including national highways, rural roads, inter-State connectivities and road over-and under-bridges at the unmanned level crossings of rail tracks.   After 2014, as the international fuel prices dipped and government took to increasing the duties. In the next three years, the collections were raised to ₹ 62,400 crore in fiscal 2017, according to Budget documents. At the end of the current fiscal, the government hopes to collect over Rs. 85,000 crore as per revised estimates.

Road and infrastructure cess

Finance Minister Arun Jaitley has proposed replacing the road cess with a road and infrastructure cess, through the Finance Bill, 2018.

Chapter VII of the Finance Bill, 2018 proposes for the introduction of road and infrastructure cess.  This cess will be collected on imported goods and on excisable goods.

Cess on imported goods

Clause 109 of the Bill provides that the government will levy an additional duty of customs to be called the Road and Infrastructure cess on the goods specified in the Sixth Schedule being the goods imported into India at the rate specified in the said schedule for the purpose of financing infrastructure projects.

Schedule VI specified motor spirit commonly known as petrol and high speed diesel oil.   The rate of cess to be levied ₹ 8/- per liter.

The road and infrastructure cess shall be in addition to any other duties of customs chargeable on the scheduled goods under the Customs Act or any other law for the time being in force.  The provisions of the Customs Act, 1962 and the rules and regulations made there under, including those relating to assessment, non levy, short levy, refund, exemptions, appeals, offences and penalties shall, as far as may be, supply in relation to the levy and collection of the additional duty of customs leviable under clause 109 in respect of scheduled goods and they shall apply in relation to the levy and collection of the duties of customs on scheduled goods under the said Act or the rules and regulations, as the case may be.

Cess on excisable goods

Clause 110 of the Bill provides that the government will levy an additional duty of excise to be called the Road and Infrastructure Cess on the goods mentioned in Schedule VI (motor spirit and high speed diesel oil) being the goods manufactured or produced at ₹ 8 per liter for the purpose of financing infrastructure projects.  The cess leviable shall be in addition to any other duties of excise chargeable on such goods under the Central Excise Act, 1944 or any other law for the time being in force.  The provisions of the Central Excise Act, 1944 and the rules made there under, including those relating to assessment, non levy, short levy, refunds, exemptions, interest, appeals, offences and penalties shall apply in relation to the levy and collection of the cess leviable and they shall apply in relation to the levy and collection of the duties of excise on scheduled goods under the said Act or the rules.

Amendment to Central Road Fund Act, 2000

For the purpose of levy of road and infrastructure cess, the Financial Bill, 2018 brought amendments to the Central Road Fund Act, 2000. 

The amended object of the Act provides that this Act will provide the Central and Road and Infrastructure Fund for development and maintenance of National High ways, railway projects, improvement of safety in railways, State and rural roads and other infrastructure, and for these purposes to levy and collect by way of cess, a duty of excise and a duty of customs on motor spirit commonly known as petrol and high speed diesel oil.

The Central Road Fund was changed to the ‘Central and Road Infrastructure Fund’.  The additional duty of customs and the additional duty of excise on motor spirit commonly known as petrol and on high speed diesel oil levied under clause 109 and clause 110 of the Finance Bill shall be deemed to be the cess for the purpose of this Act from the date of its levy and the proceeds thereof shall be credited to the Consolidated Fund of India.

Utilization of the fund

The amended section 7(1) of the Act provides that the fund shall be utilized for the-

• development and maintenance of national highways;
• development of the rural roads;
• development and maintenance of other State roads including roads of inter-State and economic importance;
• construction of roads either under or over the railways by means of bridges and erection of safety works at unmanned rail road crossings, new lines, conversion of existing standard lines into gauge lines and electrification of the rail lines; and
• undertaking other infrastructure projects.

Infrastructure projects

The explanation to section 7(1) defines the expression ‘infrastructure projects’ as the category of projects and infrastructure and sub sectors specified in Schedule II which is reproduced as follows:

Category of projects and infrastructure sub-Sectors

Sl. No.	Category	Infrastructure and sub-sectors
1	Transport	(a) Road and bridges; (b) Ports (including Capital Dredging) (c) Shipyards (including a floating or land based facility with the essential features of waterfront, turning basin, berthing and docking facility, slipways or ship lifts, and which is self sufficient for carrying on shipbuilding/repair/breaking activities) (d) Inland waterways; (e) Airports; (f) Railway track, tunnels, viaducts, bridges, terminal infrastructure including stations and adjoining commercial infrastructure (g) Urban public transport (except rolling stock in case of urban road transport)
2	Energy	(a) Electricity generation; (b) Electricity transmission; (c) Electricity distribution; (d) Oil pipeline; (e) Oil/gas/liquefied natural gas (LNG) storage facility (including strategic storage of crude oil); (f) Gas pipeline (including city gas distribution network)
3	Water and Sanitation	(a) Solid waste management; (b) Water supply pipelines; (c) Water treatment plants; (d) Sewage collection, treatment and disposal system; (e) Irrigation (dams, channels, embankments, etc.,) (f) Storm water drainage system; (g) Slurry pipelines
4	Communication	(a) Telecommunication (Fixed network including optic fiber/wire/cable networks which provide broadband/internet) (b) Telecommunication towers; (c) Telecommunications and Telecom services;
5	Social and Commercial Infra	(a) Education institutions (capital stock); (b) Sports and infrastructure (including provision of sports stadia and infrastructure for academies for training/research in sports and sports-related activities); (c) Hospitals (capital stock including medical colleges/para medical training institutes and Diagnostic centres) (d) Tourism infrastructure- Three star or higher category classified hotels located outside cities with population of more than one million; Ropeways and cable cars; (e) Common infrastructure for industrial parks and other parks with industrial activity such as food parks, textile parks, special economic zones, tourism facilities and agriculture markets; (f) Post harvest storage infrastructure for agriculture procedure including cold storage; (g) Terminal markets; (h) Soil testing laboratories; (i) Cold chain (including cold room facility for farm level pre-cooling, for preservation of storage of agriculture and allied produce, marine products and meat); (j) Affordable Housing (including a housing project using at least 50% of the Floor Area Radio (FAR)/Floor Space Index (FSI) for dwelling units with carpet area of not more than 60 square meters.

Power to amend the schedule

Section 7(2) provides that the Central Government may, depending upon the requirement for development of infrastructure projects and it considers necessary or expedient to do so, by notification in the Official Gazette, amend Schedule II relating to any category of projects or infrastructure sub-sectors.

Section 7(3) provides that every notification issued under this Act by the Central Government shall be laid, as soon as may be after it is issued, before each House of Parliament, while it is in session, for a total period of 30 days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or both Houses agree that the notification should not be made, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, so however, that any such modification or annulment shall be without prejudice to the validity of anything done previously done under that notification.

Apportionment of share of fund by Committee

Section 7A is proposed to be inserted.  According to this new section  the share of the Fund  to be apportioned to each infrastructure projects shall be finalized by a Committee, constituted by the Central Government by notification published in the Official Gazette, headed by the Finance Minister, depending on the priorities of the projects.

Management of the Fund

Section 9 of the Act is proposed to be substituted by new provision.  According to this section the Central Government shall have the power to administer the Fund and shall-

• take such decisions regarding investment on projects of roads and other infrastructure as it considers necessary;
• take such measures as may be necessary on projects of roads and other infrastructure maintenance of roads and other infrastructure.

Functions of the Central Government

After the proposed amendment Section10 will provide the following-

• administration and management of the share of Fund allocated to the development and maintenance of the national highways , roads and other infrastructure;
• co-ordination and complete and timely utilization of all sums allocated out of the Fund;
• formulation of criteria on the basis of which the specific projects of State roads of inter-State and economic importance are to be approved and financed out of share of State roads;
• release of funds to the States for specific projects and monitoring of such projects and expenditure incurred thereon;
• formulation of the criteria for allocation of the funds for development and maintenance of national highways and other infrastructure projects;
• allocation of share of funds to each State and Union territory specified in the First Schedule to the Constitution.

Administration of States’ share of the Fund

After amendment section 11 of the Act will provide the following-

• The share of the Fund to be spent on development and maintenance of roads shall be allocated in such manner as may be decided by the Committee;
• The portion of the Fund allocated for expenditure in the various States and Union territories shall be retained by the Central Government until it is actually required for expenditure.
• If in the opinion of the Central Government, the Government of any State or the administration of any Union territory has at any time-

• failed to take such steps as the Central Government may recommend for the regulation and control of motor vehicles within the State or the Union territory; or
• delayed without reasonable cause the application of any portion of the Fund allocated or reallocated, as the case may be, for expenditure within the State or Union territory

the Central Government may resume the whole or part of any sums which it may have at that time held for expenditure in that State or the Union territory.

• All sums resumed by the Central Government from the account of any State Government or Union territory administration as aforesaid shall be re-allocated between the credit accounts of the defaulting and other State Governments and Union territory administrations in the ratio of the main allocation for the financial year preceding the year in which the re-allocation is made.
• The balance to the credit of the Fund in respect of any allocation shall not lapse at the end of the financial year.

Conclusion

The government expects to raise Rs.1.13-lakh crore through the road and infrastructure cess next financial year. This will be almost Rs. 30,000 crore more than the collections it expects to make this year on account of road cess till January, and road and infrastructure cess in February and March.

Discussions to this article

[Ganeshan Kalyani]

Why still the conditions of the road are still worse which claims lot of life?