The Group of Ministers (GoM) formed to consider issues relating to levy of cess on sugar under Goods and Services Tax (GST) in its first meeting on Monday decided to seek Law Ministry’s opinion on the legality of such a levy. The committee, chaired by Assam’s Finance Minister Himanta Biswa Sarma, will also seek a report from the Food Ministry on how it proposes to utilise the collections from the imposition of cess on sugar.
“The GoM has met today. First question is whether council at all has the power to impose cess, we have decided to refer that to the Law ministry,” Sarma told reporters after the meeting.
The panel, which will meet next on June 3 in Mumbai, expects the Law Ministry as well as the Food Ministry to give their views by the end of this month.
“We must first know whether legally we have the power or not to levy cess…. if the law Ministry says there is power, Council will exercise that power when it serves public interest,” Sarma said.
The GST Council in its last meeting on May 4 had discussed the proposal to levy sugar cess. States such as West Bengal, Kerala and Andhra Pradesh had raised objections, saying that the imposition of cess on sugar militated against the ‘One Nation, One Tax’ concept of the GST regime and would, in effect, distort the GST structure and hurt the common man. The Council had then set up a 5-member GoM to consider the issues surrounding such cess. The other members of GoM include UP Finance Minister Rajesh Agrawal, Maharashtra Finance Minister Sudhir Mungatiwar, Kerala Finance Minister Thomas Isaac and Tamil Nadu Fisheries Minister D Jayakumar.
Talking to reporters after the meeting, Isaac said the GoM would discuss the alternatives of levying cess as well as how the Centre was meeting the needs for supporting sugarcane farmers in the past. “There was a cess but that cess was inadequate. It ranged between Rs 500-2,000 crore in last three years prior to GST roll out. So how was the residual support been garnered. All this would be presented to the committee. We will discuss it,” Isaac said.
The Ministry of Consumer Affairs, Food & Public Distribution had recommended imposition of cess at a rate not exceeding Rs 3 per kg on supply of sugar over and above 5 per cent GST, collections from which will flow into a separate fund and would be utilised for interventions in the sugar sector and for cane farmers. The GST rate on ethanol was also recommended to be cut from present 18 per cent to 12 per cent. Under GST, cess ranging from 1-15 per cent is levied on luxury, sin and demerit goods on top of the highest tax rate of 28 per cent and the collections from cess are utilised to compensate the states for revenue loss under GST. The revenue collection from the proposed sugar cess is estimated to be about Rs 6,700 crore a year at Rs 3 per kg. The sugar cess was proposed to be a single point cess, imposed only on supply of sugar from sugar mills and imports of sugar.