Rs 1,5000 crore tax relief for sugar cooperatives as Gujarat approves past prices

Gandhinagar: In a major relief to the state’s agriculture sector, the Gujarat govt has officially approved the sugarcane prices paid by cooperative societies to farmers between 2007-08 and 2014-15. The retrospective approval effectively wipes out a looming income tax (I-T) burden of Rs 1,500 crore on these cooperatives.

Providing information on the background of this decision, state cooperation minister Jitu Vaghani said that sugar societies across the country generally pay sugarcane farmers prices based on the fair and remunerative price (FRP) fixed by the Centre.

“In Gujarat, cooperative sugar societies have ensured that farmers receive maximum benefits not only from sugar production but also from the income generated through various by-products such as molasses, ethanol, and power generation through co-generation. As a result, sugarcane farmers in Gujarat have consistently received higher prices compared to farmers in other states of the country,” the minister said.

As a result, the I-T department had treated the prices paid above the FRP as profit and issued tax demand notices to various sugar cooperative societies in Gujarat, the minister said. “Due to this complex issue related to the period from 2007-08 to 2014-15, Gujarat’s sugar cooperative societies were facing a potential financial burden of Rs 1,500 crore,” he added.

Vaghani said that an amendment was made in the I-T Act in 2023, where a legal provision was introduced to recognise sugarcane prices approved by state govts for I-T purposes.

He added that the chief minister constituted a high level committee to make recommendations to the govt in this matter. Responding favourably to recommendations of the committee, the govt has taken a farmer-centric decision to officially approve the sugarcane prices paid by sugar cooperative societies to farmers during the period from 2007-08 to 2014-15, an official statement quoted the minister as saying.