Earmarked Taxes: An Indian Case Study

Abstract

Earmarked taxes called cesses are mandatory taxes specifically collected for earmarked public purposes. This article looks at the conceptual understanding of earmarking and then uses the Indian experience as a case study to examine how earmarking works in practice and the ensuing challenges. The article also explains the standards that a cess tax must fulfil under Indian law to be constitutionally valid while highlighting how the cess laws fare in this regard. Having demonstrated the gaps, the article presents the jurisprudence on cess taxes developed by the constitutional courts. The authors conclude by advocating the need for a rights-based analysis of earmarking.