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On the economic policy front, it was amply clear that unlike other crises, Covid-19 had a significant impact on demand and supply. India recognised the disruptive impact and had to charter its unique path amidst the dismal projections. As a result of the policy initiatives undertaken by the government, as per the Economic Survey, the country saw a V-shaped recovery.
In the backdrop of an unprecedented crisis, the year 2020-21 had been a challenging one on the fiscal front. The shortfall in revenue collection owing to the interruption in economic activity and the additional expenditure requirements to mitigate the fallout of the pandemic on the economy created immense pressure on the available limited fiscal resources.
To cater to the deficit, a rumour made rounds among the masses that government may implement a CovidCess . However, to the relief of the industry as well as the masses, no such cess was introduced. On the contrary, new ‘Agriculture Infrastructure and Development Cess’ (AIDC) has been levied which would be collected on specific imported and excisable goods.
The main purpose for levying AIDC is to finance agriculture infrastructure and other development expenditure, while also conserving and processing agricultural output efficiently. AIDC shall be levied on import of goods specified in the first schedule of the Customs Tariff Act at a rate not exceeding the customs duty rate. This includes the import of goods like fruits, pulses, certain alcoholic beverages, coal, cotton, fertilisers, gold, silver, etc. The said cess is also levied as an additional duty of excise on the manufacture of petrol and high-speed diesel.
AIDC has been made effective from February 2, 2021. To calculate AIDC on imports, the value of goods to be considered would be the transaction value (Section 14 of the Customs Act). Basic Customs Duty (BCD) rates have been simultaneously lowered on items on which AIDC is being imposed.
This step seems to have been adopted to ensure that the imposition of cess does not lead to an additional burden on the consumer. Social Welfare Surcharge (SWS) would be levied on AIDC. However, exemption from SWS on AIDC has been given on gold and silver. Goods imported under customs duty exemptions available under FTA and EOU as well as under advance authorisation schemes are exempted from AIDC.
Further, AIDC is also being levied on the manufacture of petrol and high-speed diesel at ₹2.50 per litre and ₹4 per litre respectively. With the imposition of AIDC, Basic Excise Duty (BED) and Special Additional Excise Duty (SAED) on petrol and high-speed diesel are being lowered so that overall incidence of duty on consumer stands unchanged.
However, the applicable Road and Infrastructure Cess (RIC) remains unchanged. As for implementation of AIDC on these products, their duty structure would be as shown in the Table.
Specific levy
AIDC is exempted for blended fuels — 5 per cent ethanol blended petrol, 10 per cent ethanol blended petrol, and 20 per cent bio-diesel blended high-speed diesel — and the new category of blended fuels — 15 per cent Methanol blended Petrol (M-15 fuel) and 20 per cent Ethanol blended petrol (E-20 fuel).
A cess is a levy for a specific purpose and ought to be used for the said purpose only. The Comptroller and Auditor General of India, in its report for FY 2018-19, observed that out of the total ₹2,74,592 crore received from 35 cesses and other charges in 2018-19, merely ₹1,64,322 crore had been transferred to respective funds/boards and the rest was detained by the Consolidated Fund of India.
The Ministry of Finance had been categorically recommended to take corrective action and ensure that the amounts not spent for the intended purpose are appropriately transferred. With the Ministry already facing a challenge to allocate and account for the various existing cesses collected, it seems that the government may have hastened with this new cess, making it even more interesting to wait and watch whether it meets the desired outcome of enhancing farmers’ remuneration.
The writer is Associate Partner - Indirect Tax, BDO India
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