New Delhi: Existing mechanisms to provide financial relief for states battling severe natural calamities are insufficient, the states agreed on Monday, even as discussions remained inconclusive on ways to raise additional resources to fund the gap under the goods and services tax (GST).
The GST Council had constituted a group of ministers (GoM) under Bihar deputy chief minister Sushil Kumar Modi last month to suggest additional ways for funding disaster relief through the levy of a cess or a tax. The GoM met for the first time on Monday.
This came after flood-ravaged Kerala demanded additional resource mobilization measures for rebuilding the state’s infrastructure. Kerala had proposed a cess of 10% over and above state GST within the state for raising additional funds.
“States agree that the National Disaster Response Fund (NDRF) and State Disaster Response Fund (SDRF) are not sufficient to meet the funding requirements in case of a natural disaster. We are discussing what should be the nature of the additional tax or cess that will have to be levied," Modi said in a press briefing after the meeting.
The GST Council will seek the views of the attorney general on the cess. Talks will also be held with the Fifteenth Finance Commission over NDRF and SDRF, Modi said.
A questionnaire will be sent to all states seeking their views on the nature of the additional tax or cess, Modi said. It will seek the views of states on issues such as whether the cess should be state-specific or levied across the country and on the mechanism that should be put into place if a state it wants to raise the tax rates or levy a cess.
The group will again meet by November, Modi said.
NDRF is partly funded by the central government budget and partly by the levy of a national calamity contingent duty (NCCD) on a few products like tobacco. Modi said collections from NCCD have been declining. This was ₹ 3,660 crore in 2017-18 against ₹ 6,450 crore in 2016-17.
Kerala finance minister T.M.Thomas Issac, also a member of the GoM, stressed the need for well laid-out funding mechanisms under GST to help states suffering from a natural disaster and said the current funding mechanism is inadequate.