Surcharge

Reviewed by Adithyan | Updated on Sep 24, 2021

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Introduction to Surcharge

You must have noticed while paying for certain items that you are sometimes charged more than the initial price of the product, goods or services. This is charged in a form of tax, fee or extra charge which is known as surcharge.

So basically, a surcharge as its name suggests is an extra charge or tax which is charged for certain goods and services. Through this article we will have a brief look at surcharge and how it works.

What is a Surcharge?

Surcharge basically is an additional fee, charge or tax added by a company to the initial price of the good or service. Surcharge is usually added to the existing tax and is not mentioned in the price of the good or service which makes the final price that is to be paid by the customer much higher. For example if the initial tax rate is 30% and an additional 10% of surcharge is added to it, the total tax burden will rise to about 33%.

This is often done by companies such as telecom companies, travel companies, cable companies, etc. to compensate for the cost of additional higher commodity prices like fuel or emergency services or regulatory fees imposed by the government. Another type of surcharge which is most commonly levied is the ATM surcharge which is levied by the bank. This surcharge can be charged as a specific amount after each transaction from the ATM.

By adding surcharges, the company passes the additional costs to the customers. These costs are stated separately from the commodity’s original price, which appears to stay the same. All industries from small to large and even governments apply surcharges to various goods and services.

In India, an individual with an annual income of more than 1 crore has to pay a surcharge of 10%, small corporations with a net income of 1 crore to 10 crore have to pay a surcharge of 5% and those with an income of more than 10 crore are levied with a surcharge of 10%, foreign corporations with a net income rate of 1 crore to 10 crore have to face a surcharge of 2 % while those exceeding the net income of 10 crore have to face a surcharge of 5%.

The government of India considerably offers some marginal relief to both the domestic and foreign corporations that cross the net income of 1 crore and 10 crore in the levitation of surcharges.

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