What is agri-cess? Whether it affects the general public?

The Union Budget 2021 proposed an Agriculture Infrastructure and Development Cess (AIDC) effective from February 2, 2021on specific goods as below.

Items     

Petrol – Rs.2.50 per litre

Diesel – Rs.4 per litre

Gold, Silver and Dore bars -2.50%

Alcoholic beverages (falling under chapter 22)-100%

Crude palm oil -17.50%

Crude soyabean and sunflower oil-  20%

Apples – 35%

Coal, lignite and peat- 1.50%

Specified fertilizers (Urea etc)- 5%

Peas-40%

Kabuli Chana-30%

Bengal Gram/Chick peas-50%

Lentil (Mosur)-20%

Cotton (not carded or combed)-5%

The Agriculture Infrastructure and Development Cess (AIDC) is a tax the government imposed on the commercial production of agricultural produce.  The Finance Minister announced that the money collected through Agri cess will be used for infrastructure development in agriculture across the country.  The Finance Minister told in her speech that “while applying this cess, we have taken care not to put additional burden on consumers on most items”. The Finance Minister further said that the impact will be offset by an equivalent or more reduction in the import duty. The higher cess will be adjusted with lower customs duty, she said. For example, to accommodate the new cess of Rs 2.5 a litre on petroleum, the Centre has cut the basic excise duty on petrol from Rs 2.98 to Rs 1.4. Similarly, for diesel, the basic excise has been cut from Rs 4.83 to Rs 1.8 a litre.  Likewise, for alcohol, to negate the impact of 100 percent cess, the corresponding basic customs duty was reduced from 150 percent to 50 percent. As a result, the net effective rate of import duties remained at 150 percent.

However, State Governments are not happy with the decision of the Central Government to impose agri-tax or cess because their revenues are likely to take a hit as hitherto Central excise and customs duties is divided between the Centre and the states according to a formula devised by the Finance Commission. Opposition parties are critical against imposing Agri-cess. Leader of the Opposition in Karnataka Assembly Siddaramaiah said that Finance Minister Nirmala Sitharaman while claiming to have not imposed any new tax, has tried to mobilise resources through the AIDC. “Cess has been levied on even agricultural products such as fertilizers and fuel, that will, in turn, affect farmers also,” he said.