A ministerial panel on imposing cess on sugar today decided to seek law ministry opinion on the legality of such a levy.
The panel, chaired by Assam Finance Minister Himanta Biswa Sarma, will also seek a report from the food ministry on the final utilisation of the proceeds from levy of sugar cess.
“The GoM has met today. First question is whether council at all has the power to impose cess, we have decided to refer that to the Law ministry,” Sarma told reporters here after the first meeting of the panel.
The Group of Ministers (GoM) was constituted on May 4 to look into the feasibility of implementing the food ministry proposal of levying cess on sugar to benefit sugar cane farmers.
The food ministry in its report to the GoM will detail out how it is proposing to disburse the proceeds from levy of cess.
The GoM expects the law ministry as well as the food ministry to give their views by the end of this month.
The GoM will meet next on June 3 in Mumbai.
“We must first know whether legally we have the power or not to levy cess…. if the law Ministry says there is power, Council will exercise that power when it serves public interest,” Sarma said.
Under the present Goods and Services Tax(GST) laws, a cess is levied on luxury, sin and demerit goods on top of the highest tax rate of 28 per cent. The collection from cess is utilised to compensate the states for revenue loss under GST.
The GST Council had on May 4 deliberated on the food ministry proposal of imposition of cess of up to Rs 3 per kg on supply of sugar over and above 5 per cent GST rate. The proceeds from the levy will flow into a separate fund and would be utilised for interventions in the sugar sector and for cane farmers.
As per estimates, the levy of cess could fetch about Rs 6,700 crore to the government.
The food ministry also recommended to the Council to cut GST rate on ethanol from present 18 per cent to 12 per cent.
The Council then set up a 5-member GoM under Sarma to consider the issues surrounding the levy of cess on sugar. The other members of the GoM include Uttar Pradesh Finance Minister Rajesh Agrawal, Maharashtra Finance Minister Sudhir Mungatiwar, Kerala Finance Minister Thomas Isaac and Tamil Nadu Fisheries Minister D Jayakumar.
Talking to reporters after the meeting, Isaac said the GoM will discuss on the alternatives of levying cess as well as how the Centre was meeting the need for support of sugar in the past.
“There was a cess but that cess was inadequate. It ranged between Rs 500-2,000 crore in last three years prior to GST roll out. So, how was the residual support been garnered. All this would be presented to the committee. We will discuss it,” Isaac said.
Prior to GST roll out on July 1, 2017, a cess was levied and collected under the Sugar Cess Act, 1982, as duty of excise for the purpose of the Sugar Development Fund.
Through Taxation Laws Amendment Act, 2017 various cesses, including sugar cess, were abolished with effect from July 1, 2017.
If the Council decides on levying cess on sugar a new legislation has to be brought in specifying the levy of cess and the proceeds of which will be going to a special fund to compensate sugarcane farmers.