GST was intended to amalgamate all indirect taxes into JUST one. We were told its "One Nation, One Tax" (really there are at least 4 taxes - CGST, IGST, SGST and UTGST). The pre-GST cesses like education, higher education, Swach Bharat, krishi kalyan were all embedded in GST together with central excise, VAT, CST etc. to remove the layering of taxes over taxes leading to cascading. The only exception to this rule was the compensation cess on select items in GST. This compensation cess is intended to neutralise tax losses if any of the States. That too only for a limited period of five years from GST introduction.
Now there is talk of a sugar cess. This is being proposed @ Rs 3/- per kg. The current price of sugar ranges between Rs 2800 to 3000 per quintal. Thus the sugar cess translates to approximately 10% of the price. The estimated annual sugar consumption in India being around 26MMT, the proposed cess will collect approximately Rs 7800 Crores annually.
The intention surrounding the proposal of sugar cess is quite obviously noble i.e. to assist the sugarcane farmers who are in deep distress. However, the question is, does this have to be this way? By layering another cess over and above the newly introduced GST? This quite naturally militates against the basic principle of GST, which is to amalgamate all indirect taxes into one to avoid multiplicity and cascading. On the one hand the Minister of Petroleum & Natural Gas, Mr Dharmendra Pradhan has been relentlessly advocating inclusion of the excluded five petrol products into the rational tax mechanism of GST to control petrol prices and inflation. On the other hand we are set to introduce a new cess outside the scope of GST which is not just a minor percentage of the tax amount.
A significant question here is, will every such crisis or stress lead to other new cesses being introduced from time to time? Are we on the road to replace central excise, VAT, CST, CVD etc with GST plus a clutch of various cesses?
It’s not as if GST was introduced smoothly or painlessly! Indeed it is still being stabilized. The last question therefore is, can the Government not come up with some other idea to fund Rs 8000 Crores to alleviate the the sugarcane farmers distress?