The Central Government is planning to levy a cess of Rs 3 per kilo of sugar sold by sugar companies in a bid to raise funds for cane farmers. Sugar factories in the country have been running in losses.
The decision to do so comes with the aim of relieving the debts of cane farmers who have not been getting their share from the factories. The factories have gone into losses with the decline in sugar prices. Hence the step is meant to raise funds worth Rs 1540 crores to pay cane farmers on mill's behalf.
The cess will be in addition to the 5 per cent GST currently levied on sugar. The decision on the cess will take place at the GST Council meet today which will be chaired by Union Finance Minister Arun Jaitley. He will be joined by state finance ministers via video conference.
Other important issues that are likely to be discussed include slashing the GST rate on ethanol from the current 18 per cent. This is a demand raised by the oil companies. Government's stake in GST Network (GSTN), incentives for digital payments and simplification of GST process may also be discussed.
Prashanth Agarwal, Indirect tax Partner at PwC, told DNA that the cess though levied on the companies is likely to impact consumers. He also said that multiple taxes and cess are against the value of GST and would make compliance and operations more complex. As a result it creates a mess of the tax structure under GST.
In Uttar Pradesh, Maharashtra and Karnataka, arrears worth Rs 19,000 crores need to be paid to farmers by sugar factories.
According to industry body Indian Sugar Mills Association (ISMA), the sugar prices have been under severe pressure in the last four to five months and have fallen by Rs 9 per kilo across the country.
"As compared to the cost of production, the current ex-mill sugar prices are around Rs 8 per kilo lower and the sugar mills are incurring substantial losses. Inability to pay cane price because of highly depressed sugar prices, has translated into huge cane price arrears of farmers," ISMA points out.
As on March 15 this year, cane price arrears was over Rs 18,000 crore across the country. "Since the sugar prices have only fallen from therein, the cane price arrears would have crossed Rs 20,000 crore, which would be the highest ever at this time in any of the past seasons," says ISMA.