A Group of States’ Finance Minister on Wednesday said it was not in favour of imposing cess on sugar. However, it supported a proposal to lower GST on ethanol to be used for blending with petrol and diesel.

The group will formally submit its recommendation on both the issues to the GST Council which is will meet on July 21. The Group also mulls levying cess on luxury items at the rate of 1 per cent for an Agriculture Welfare Fund. However, it will formalise a proposal in this regard only after the Attorney-General (AG) gives his views. The proposal envisages a provision for levying cess to create a fund and money collected will be used for any farmer in distress, be it sugarcane, tea or rubber. The AG is expected to give his views on imposing cess, apart from what is mentioned in the GST (Compensation to States) Act 2017.

The Group, under the chairmanship of Assam Finance Minister Himanta Biswa Sarma, met here to formalise its recommendation. “The proposal for sugar cess is now in cold storage and the Group is likely to recommend to 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, the GST Council will take a call on that,” he said.

Later, Sarma said after Cabinet decision of fixing minimum selling price at ₹29 a kg, sugar mills have been able to add ₹5000 crore in their balancesheet.

“The arrears has come down from ₹23,000 crore to ₹18,000 crore. Considering this kind of positivity, there is no need to impose a cess,” he said. However, he declined to say what exactly will be recommendation to be submitted to the GST Council. He, however, confirmed that some consensus has emerged on lowering duty on ethanol.

Sugar cess proposal

The proposal envisages “imposition of cess at a rate not exceeding ₹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 ₹19,000 crore (as on January 31, 2018). Dues were around ₹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.