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NEW DELHI: Protest by some states, including Kerala, West Bengal and Andhra Pradesh, prompted the GST Council to order a review of the plan to levy a cess on sugar to “help” sugarcane growers as they complained that the move would only benefit Uttar Pradesh, Maharashtra and poll-bound Karnataka, while discarding the basic principle of the new regime that focused on removing all additional levies. The cess would have helped government raise Rs 6,700 crore.
During discussions on the cess, which stretched for over two hours, these states, with support from Tamil Nadu, Delhi and Pondicherry, argued that imposition of a cess on sugar will also make other states such as Kerala, West Bengal and Punjab demand a similar benefit for rubber, jute and foodgrains. “There will be no end and will defeat the very purpose of GST,” said a source, adding that some of the finance ministry officials were also sympathetic to this argument. While introducing GST, the Centre and the states decided to abolish all cesses and surcharges other than compensation cess (covering luxury and sin goods) for a period of five years.
FM Arun Jaitley said after the meeting that cane growers were in deep distress as the cost of sugar production is over Rs 35 per kg, while the market price of sugar is around Rs 26-28 a kg. The cess on sugar was proposed to raise money to compensate farmers for a loss due to surplus production.
The states opposing the cess suggested that UP and Maharashtra, which are grappling with the problem, should provide budgetary support as the move is only going to benefit sugar mills in their jurisdictions, although the cess will be paid by consumers across the country to help farmers.
A panel under Assam finance minister Himanta Biswa Sarma, along with ministers from UP, Maharashtra, Tamil Nadu and Kerala, will deal with issue of levy of cess on sugar and reduction of GST on ethanol and is expected to submit its report in a fortnight.
Jaitley said that the discussions have thrown up several new aspects. “How are such contingencies to be addressed in the GST regime, are they to be addressed by imposition of cess or are they to be addressed by temporarily increasing the tax or by some alternative method of revenue raising?”
The ministerial panel would make a recommendation to the council on the avenues to raise revenue to meet contingencies of this kind where the cost of commodity is much higher than its selling price.