A tax needs the approval of the GST Council, but a cess is not a tax
In a bid to help sugarcane farmers, the government has cleared a special cess to compensate them with plummeting prices and cash-starved mills finding it difficult to clear cane dues. The issue has been referred to Attorney General K.K. Venugopal for his opinion.
The Union Law Ministry has okayed the cess as it is of the view that the imposition of a cess is not inconsistent with the goods & services tax (GST) regime. “A tax needs the approval of the GST Council, but a cess is not a tax,” a Ministry official told this correspondent.
The matter has gained political importance in view of the Bharatiya Janata Party’s recent loss in the Kairana Lok Sabha constituency in western Uttar Pradesh, which is a sugar belt. There was considerable resentment in the area that is said to have played an important role in the ruling party’s defeat.
A five-member panel of the Council is deliberating upon the subject. It held its second meeting in Mumbai on June 3. Apart from the proposed cess, it is examining the possibilities of a higher production-linked subsidy. In April, an Rs 1,500-crore production-linked subsidy was announced, but it has proved to be inadequate.
At 310 lakh tonnes, the production till the end of April in the current season was about 20 per cent more than the estimated annual domestic consumption. The cash crunch faced by sugar mills has resulted in zooming arrears to farmers; these are in the region of Rs 20,000 crore. Of this, UP alone accounts for over Rs 12,000 crore.
Another proposal doing the rounds is regarding a lower GST rate on ethanol. At present, the GST on ethanol is 18 per cent; it may be brought down to 5 per cent to neutralize lower sugar prices.
1. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.