In a good news for consumers, a group of state finance ministers set up to examine the food ministry's proposal to impose a cess on sugar over and above the GST has rejected the idea after three months of discussion. Headed by Assam Finance Minister Himanta Biswa Sarma, the GoM, as per sources, took into account the decline in arrears to be paid to sugarcane growers by sugar mills. A few months ago, these arrears had climbed up to Rs 23,000 crore, and the unrest among cane growing farmers had hit the BJP's fortunes in the bypoll for the Kairana constituency in western UP, which is a major cane growing belt. Now with the minimum support price (MSP) for sugar being fixed at Rs 29 per kilo, these arrears have dipped by Rs 5,000 crore.
The GST Council had formed a GoM (Group of Ministers) in May to look into the into the food ministry's proposal for the creation of a corpus of Rs 6,700 crore through a levy of up to Rs 3 per kg on sugar over the existing GST of 5 per cent on the good. The ministry had proposed the corpus could be utilised specifically for helping out farmers and sugar manufacturers in times of distress. This would have hit the common man at a time when the BJP-led NDA government is shaping the contours of its campaign for 2019 General Elections.
The GoM, however, is still considering other measures to firm up collections to check distress in future in a sector that is considered politely significant. A proposal of 1 per cent agri cess on luxury items is still on the table to check volatility in the sector. If cleared, several luxury items that come under the highest tax slab will get more expensive. This proposal, however, has a legal twist.
A case regarding the cess inclusion in the GST regime is pending in the Supreme Court. The GoM has sought the Attorney General of India's opinion on the feasibility of imposing cess, at a time when surcharges, levies, and cess have been subsumed in the one tax for all in the GST regime. If the AG gives a green signal, the GoM plans to move the cess proposal for clearance in the next meet of the GST council on July 21. The GoM wants legal clarity as the multiple rates under GST are already facing fire from opposition parties.
In another important rationalisation, the GoM cleared a reduction in GST levied on ethanol to 12 per cent from the current 18 per cent. This would help promote the use of ethanol as a fuel additive and reduce to a small extent the huge crude import bill, especially at a time when crude prices seem to be inching north and rupee heading south.