Ministerial committee opposes cess on sugar

Awaiting Attorney General’s opinion

A group of State Finance Ministers set up by the Goods and Services Tax (GST) Council is against the imposition of a cess on sugar, and is likely to recommend a reduction in GST on ethanol, according to highly placed government sources.

Their recommendations will be presented at the next meeting of the GST Council on July 21. Before making a final recommendation, the Ministerial panel is waiting for the Attorney General to give his legal opinion on whether any such cess can be imposed under the GST regime. “However, the political call has been taken that there will be no cess,” said a senior government official.

With regard to the GST on ethanol, the panel has decided to recommend a reduction from the current 18% to at least 12%. A senior official said the final recommendation was more likely to be 5%.

The original proposal to impose a cess on sugar came from the Food Ministry and was recommended in April by an earlier Group of Ministers headed by Transport and Shipping Minister Nitin Gadkari. That GoM was tasked with resolving the payments crisis of sugar mills, whose pending dues to farmers crossed ₹22,000 crore earlier this summer. The money collected from the cess was supposed to fund interventions on behalf of cane farmers.

However, when the proposal was mooted at the last GST Council meeting in May, several States expressed their objections, and questions were raised whether a cess could be legally imposed under a GST regime.

Accordingly, the five-member panel headed by Assam Finance Minister Himanta Biswa Sarma, was set up to study the issue and make its recommendations. The other members are the Finance Ministers of Kerala, Uttar Pradesh, and Maharashtra, Thomas Isaac, Rajesh Agarwal, and Sudhir Mungantiwar and Tamil Nadu Fisheries Minister D. Jayakumar.

In the meanwhile, the government took several other steps to help sugar mills and farmers, including a production subsidy, minimum price and buffer stock. The pending dues have fallen by at least ₹3,000 crore by June 25, according to the Food Ministry.

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