The law ministry is of the view that that the goods and services tax (GST) council has the powers to recommend cess for any commodity under the new indirect tax regime despite facing opposition from at least three state governments on imposing such a levy on sugar.

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The ministry has submitted this view to a group of ministers (GOM) headed by Assam finance minister Himanta Biswa Sarma, said multiple people familiar with the development.

“GST Council under Article 279 (A) of constitution has powers to recommend cess for any commodity," a government official privy to the matter told CNBC-TV18, asking not to be named.

The proposal envisaged by the GST Council was to impose “cess at a rate not exceeding Rs 3 per kg on supply of sugar” (over and above the GST at 5 percent). The central government expects to mobilise about Rs 6,700 crore annually by imposing this cess.

The GOM, which is slated to meet on June 3 in Mumbai, will discuss on the view of the law ministry and assess the quantum of sugar cess that should be levied, if at all it has to be, said the official quoted above. The GOM will also work out a mechanism on distribution of this sugar cess.

Once the final view of GOM is submitted to the GST Council and the council approves the proposal, legislative action will be required. This might be initiated through an ordinance.

The GST Council is a constitutional body that makes recommendations to the central and state governments on issues related to the GST.

The cess was proposed at the 27th meeting of the GST Council on May 4. However, it was deferred after Andhra Pradesh, Kerala and West Bengal opposed the move. A group of state finance ministers was consequently formed to consider the various issues involved. The GoM was expected to submit its report within 15 days of its constitution, from May 4.

However, Sarma told CNBC-TV18 on May 14 that the decision cannot be taken in a meeting or two and would require detailed deliberations. The GOM, which met earlier this month, would also look into the possible revenue loss and impact of such a cess on various stakeholders.

On May 4, finance minister Arun Jaitley said the sugar industry was passing through a tough time because the production cost had crossed Rs 35 per kg while the commodity was being sold in the markets at an average price of between Rs 26 to 28 per kg.

Revenue collection from GST has crossed Rs 1 lakh crore in April, signalling that the new indirect tax regime that was rolled out in July 1 last year has stablilised.

"If the GST Council approves the levy of cess on sugar, it will be through the ordinance route," revenue secretary Hasmukh Adhia too said on the same day.

First Published:May 24, 2018 5:27 PM IST