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Agriculture Infrastructure and Development Cess (AIDC): Fostering Agricultural Growth and Development

The Agriculture Infrastructure and Development Cess (AIDC) was introduced in the budget proposals, clause 115(1) of the Finance Bill 2021. This cess is imposed on goods specified in the first schedule to the Customs Tariff Act of 1975 when imported into India. The government aims to utilize the funds collected through AIDC for infrastructure development in agriculture across the country. In this article, we will delve into the details of AIDC, its importance, concerns raised by states, its impact on consumers, and the items subject to this new cess. This was a significant stride towards the development of the agricultural sector by the Indian government. This new cess is designed to provide dedicated funds for the comprehensive enhancement of agricultural infrastructure and support the growth of farmers across the country. The AIDC is set to play a pivotal role in transforming the agricultural landscape, ensuring sustainable agricultural practices, and driving India towards a prosperous and self-reliant future.

What is Agriculture Infrastructure and Development Cess?

The Agriculture Infrastructure and Development Cess (AIDC)¹ is a tax imposed by the government on the commercial production of agricultural produce. The charge rate of the cess depends upon the production capacity. The revenue generated through AIDC will be utilized for infrastructure development in agriculture to enhance productivity and protect the sector from undue competition, ultimately increasing its output competently. The funds generated through this cess will be utilized for various essential objectives, including creating state-of-the-art storage facilities, developing robust cold chains, improving transportation networks, implementing modern processing units, and enhancing farmers’ overall well-being.

Importance of Agriculture Infrastructure and Development Cess

The introduction of the AIDC is crucial due to its potential usage and implications. The cess will be utilized for infrastructure development in agriculture across the country, leading to improved production capabilities and safeguarding the sector from excessive competition. By enhancing the output capacity of the agricultural industry, the government seeks to send a positive message to farmers regarding their welfare and development.

Concerns Raised by States

While the AIDC aims to boost agricultural infrastructure, some states are discontent with this new cess. They argue that restructuring taxes announced in the budget will result in a revenue hit. It is important to note that the Agriculture Infrastructure and Development Cess collection will not be part of the divisible central pool of funds, which means states will not have access to it. The offsetting of this levy through a reduction in other central levies implies that states will lose out on their share of central revenue.

For instance, if 2.5 rupees per liter AIDC is imposed on petrol, the basic excise duty and special additional excise duty will be lowered to offset the impact. As a result, while states could have received 41% of the amount collected from duties levied on petrol, the central government will retain 2.5 rupees per litre for its discretionary spending. Similar adjustments have been made for alcohol, with the basic customs duty reduced to nullify the impact of the 100% AIDC levy. However, the central government has assured that the amounts lost to states will be insignificant. Additionally, states are expected to benefit from the levy of this cess as the spending will be earmarked for state-specific projects and initiatives.

Impact on Consumers

Consumers need not worry about additional burdens due to the Agriculture Infrastructure and Development Cess. In the budget presentation, Finance Minister Nirmala Sitharaman proposed reducing Basic Customs Duty on items subject to AIDC. This means that the amount levied as AIDC on petrol and diesel, for example, will be counterbalanced by an equal reduction in Basic Excise Duty and Special Additional Excise Duty, ensuring zero impact on fuel prices.

Items Subject to AIDC

In addition to petrol and diesel, the AIDC cess will be levied on various other items, including gold and silver Dore bars, crude palm oil, crude soybean oil, Kabuli Chana, apples, Bengal gram, and more. However, these items are expected only to impact a portion of the population significantly. Specific adjustments have been made, such as a 10% customs duty hike on cotton and a 15% customs duty hike on uncooked silk and silk yarn. The end-use-based concession on denatured ethyl alcohol has been withdrawn, and uniform customs charges have been introduced for items like rice bran oil cake and animal feed components. The Finance Minister emphasized that these levies have been applied to small items, and efforts have been made to minimize their impact.

Conclusion

The introduction of the Agriculture Infrastructure and Development Cess highlights the government’s commitment to improving agricultural infrastructure. While states have raised concerns regarding revenue implications, the central government assures that the amounts lost will be insignificant. Moreover, consumers need not worry about additional burdens as the introductory customs duty rates have been reduced on relevant items. The AIDC aims to bolster agricultural infrastructure and enhance production capabilities, ultimately benefiting the agriculture sector and contributing to the country’s overall development.

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Read our article: All about the Amendments in Custom Duty in the Budget 2021-22

1. https://pib.gov.in/PressReleseDetail.aspx?PRID=1693879