GST Cess on Sugar

The Sugar Cess Act, 1982 was introduced with an objective to increase the accumulations of the Sugar Development Fund. The fund so raised through imposition of sugar cess was aimed to help the sugar cane farmers.

While introducing the Goods and Service Tax, the Centre and the State governments had decided to abolish various cess and surcharge. Hence, from 1st July 2018, various cess like Tea Cess, Sugar Cess, etc., were abolished and only GST Compensation cess was levied. The compensation cess is levied on some ‘luxury and demerit’ like cars, cigarettes, tobacco and items in the high GST rate slab to compensate states for any revenue shortfall due to the GST in the first five years. Now the GST Council is considering introducing a cess on sugar to support farmers.

Cess Abolished under GST

Currently, there is no cess on sugar and various other cess as follows have been abolished.. Through Taxation Laws Amendment Act, 2017, the following cess were abolished from the date of implementation of GST i.e. 1st July, 2017:

• Rubber Cess – The Rubber Act, 1947
• Cess on Automobiles – The Industries (Development and Regulation) Act, 1951
• Cess on Tea – The Tea Act, 1953
• Cess on Coal – The Coal Mines (Conversation and Development) Act, 1974
• Cess on Beedi – The Beedi Worker’s Welfare Cess Act, 1971
• Cess on Water – The Water (Prevention and Control of Pollution) Cess Act, 1977
• Cess on Jute Goods – The Jute Manufacturers Cess Act, 1983
• Education Cess – The Finance Act 2004
• Secondary Education Cess – The Finance Act, 2007
• Clean Energy Cess- The Finance Act, 2010
• Swachh Bharat Cess – The Finance Act, 2015
• Infrastructure cess and Krish Kalyan Cess – The Finance Act, 2016

Update in 27th GST Council Meeting

In the 27th GST Council Meeting, it was reported that the council is planning re-imposition of sugar cess. The main reason for thinking over re-imposition of sugar cess is that the fund raised through the said cess would help the sugarcane farmers. The sugar cess, if implemented, would benefit farmers from Uttar Pradesh, Maharashtra and Karnataka. However, states such as Tamil Nadu, Kerala, West Bengal and Andhra Pradesh protested against this proposal, and has forced the GST council to order a
review.

It is argued that the re-imposition of sugar cess will signal a looming breakdown of the basic principle of imposition of GST i.e. abolition of all the cesses and surcharge. It is further argued that re-imposition of sugar cess would even encourage the other
industries for re-imposition of cess like rubber cess, tea cess etc. which are abolished with implementation of GST.

The council has worked out that re-imposing sugar cess would help the Centre in raising INR 6700 crore and this will help the distressed sugar cane farmer. The council has proposed levy of cess at the rate of INR 3 per kg. However, the final decision of
levy of sugar cess is still pending.

Conclusion

GST council has proposed for re-imposition of sugar cess, however, such re-imposition would lead to dissatisfaction amongst non-affecting states and further if the cess is being imposed the same would hamper the entire principle behind the levy of GST. We can only hope that GST council comes up with some decision which will not harm other states and the purpose of GST implementation.

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