GST Council meet: Move for sugar cess takes away sweetness of simplification of procedures; it must be junked 

The sugar industry and cane farmers are always in some form of distress. The sector needs far-reaching reform.

Seetha May 05, 2018 18:51:04 IST
GST Council meet: Move for sugar cess takes away sweetness of simplification of procedures; it must be junked 

Have the decisions of the latest GST Council meeting on easing the filing process and addressing other procedural hassles come nine months too late? Should these not have been done when the Goods and Services Tax (GST) was rolled out?

Yes, of course. But then does any economic policy get initiated and implemented in time in India? Should the economy not have been opened up way before 1991? Should Air India not have been privatised by now? Should GST not have kicked in at least five years before it finally did? The fact that this simplification process has been delayed should not detract from the fact that it is finally happening.

GST Council meet Move for sugar cess takes away sweetness of simplification of procedures it must be junked 

Representational image. Reuters

Importantly, the central and state governments have realised the importance of not rushing into something – the implementation of the single monthly return will be phased in over a year, as this article details.

There is no getting away from the fact that GST in India debuted in a far-from-ideal form – multiple rates, multiple forms, filing hassles. This has imposed a cost on businesses, especially the small ones. And it has affected compliance. A 27 April press release from the finance ministry talks about an increase in percentage of returns filed on the due date. But this still hovers around the 60 percent mark.

Nevertheless what is important is that the GST Council has been responsive to problems and has brought in amendments in terms of scything rates as well as addressing procedural issues. This is so much better than an obstinate being-in-denial mode that generally marks government functioning. That these changes have happened in the first year itself is a good sign.

But when the economy is gradually progressing towards the ideal GST, why even think of adding a new complication in the form of a cess on sugar? 

The proposal – mooted by the union ministry of consumer affairs, food and public distribution – was for this cess to help reduce the arrears of sugarcane farmers. It will involve enactment of a separate law, since all cesses have been subsumed under GST. The only cesses that remain in the post-GST regime are those on petrol and diesel  and tobacco which are outside the GST regime and education cess on imported goods (which are also not under GST).

Fortunately, most state governments strongly resisted this and the matter has been referred to a group of ministers.

There has been much debate on how much revenue the cess will bring in and whether or not the centre can meet it out of its own revenues. Non-sugar producing states certainly have a point when they ask why a tax that benefits just a few states should be borne by everyone.

But the most compelling argument against the cess is that it flies against the very idea of a simple GST, under which there are to be no separate cesses, barring the one on luxury goods which is meant to fund the compensation for revenue losses of states. Levying a cess for distressed sugarcane farmers leaves the door open for similar demands for farmers of other crops. Where is it going to end? In any case, when the number of tax slabs under GST need to be brought down further, adding another cess is a bizarre idea.

The sugar industry and sugarcane farmers are always in some form of distress. The sector needs far-reaching reform and that needs to be the focus of attention. Imposing a cess to bring down the current burden of dues to farmers is a temporary palliative that does not address the fundamental issues facing the sector and, worse, complicates a tax system that is still not perfect.

Finance minister Arun Jaitley is reported to have said that there needs to be discussion on how to deal with such contingencies in a GST era – should it be through a cess or a temporary hike in taxes. But the latter too is a bad idea as it takes away from the predictability of tax rates.

The GoM has to submit its report in 15 days – its brief is to consider issues relating only to the sugar cess. But the larger issue raised by Jaitley -- how does one deal with contingencies in a GST regime -- needs wider debate. But any solution that emerges should not tamper with the basic idea of GST as a simple one nation one tax regime. That has to be non-negotiable.

The writer is a senior journalist. She tweets at @soorpanakha

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