A Group of State Finance Ministers is not in favour of imposing cess on sugar. However, it does support the proposal to lower GST on ethanol to be used for blending with petrol and diesel.

Now, this Group will formally submit its recommendation on both the issues to the GST Council which is scheduled to meet on July 21. The Group also mulls levying cess on luxury items at the rate of 1 per cent for Agriculture Welfare Fund.

However, it will formalise a proposal in this regard only after the Attorney General (AG) gives its views. AG is expected to give its view on imposing cess apart from what is mentioned in GST (Compensation to States) Act 2017.

The Group under the chairmanship of Assam Finance Minister, Himanta Biswa Sarma, met here on Wednesday to formalise its recommendation. “Proposal for sugar cess is now in cold storage and the Group is likely to recommend the GST Council that it is not required as of now,” a senior Government official said, while adding that the recommendation on ethanol will be lowering the GST.

“Though, the original proposal was lowering the rate to 12 from 18 per cent, the Oil Ministry wants 5 per cent. So, GST Council will take a call on that,” he said.

Later, Sarma said that after the Cabinet decision of fixing the minimum selling price at Rs 29, sugar mills have been able to add Rs 5,000 crore in their balance sheet. “Arrears have come down from Rs 23,000 crore to Rs 18,000 crore. Considering this kind of positivity, there is no need to impose cess,” he said.

However, he declined to say what exactly will be the recommendation to be submitted to the GST Council. He, however, confirmed that some consensus has emerged on lowering the duty on ethanol.

Sugar cess proposal

The proposal envisages the “imposition of cess at a rate not exceeding Rs 3 per kg on supply of sugar” (over and above GST at 5 per cent). The mop-up will be used to create a fund, which will “enable the Centre to make prompt interventions to protect the interests of farmers, in view of the extreme cyclical nature of industry.” The Centre expects to get ₹6,700 crore through this cess.

The proposal, introduced at the GST Council on May 4, met with opposition from Andhra Pradesh, Kerala and West Bengal, following which a Group of State FMs was constituted to consider the various issues involved.

The proposal, mooted by the Ministry of Consumer Affairs, comes at a time when sugar mills owe farmers Rs 19,000 crore (as on January 31, 2018). Dues were around Rs 9,500 crore last year. Experts blame oversupply and the consequent subdued factory-gate sugar prices for the doubling of dues.

Before the GST introduction, a cess was being collected under the Sugar Cess Act, 1982, as excise duty for the purpose of a Sugar Development Fund. The money thus collected was used to help the industry on various fronts, including settling farmer dues. This cess was subsumed in the GST.

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