NEW DELHI: Kerala will levy a 1% cess on most goods and services in the state from 1 June to raise funds to rebuild the state from the devastation wreaked by last year’s floods.
The state had secured the permission from federal indirect tax body, the Goods and Services Tax (GST) Council, to levy the cess, which was subsequently announced in the state budget for FY19-20. The state intends to raise about ₹600 crore from the cess. The date of roll out of the cess was announced on Monday through a notification.
Kerala decided to go for the cess, an unprecedented move in the GST era where numerous central and state taxes were subsumed into a unified national sales tax, as it had limited resources to rebuild the state.
Due to floods, Kerala incurred losses to assets and crops of about ₹20,000-25,000 crore excluding loss of income, which may be even greater, Mint reported on 23 August 2018, citing state finance minister Thomas Isaac. The floods also brought the unorganized sector to a standstill.
Kerala’s move to raise resources through a cess has the potential to become a precedent, given the frequency with which natural calamities take place in the country. It is not known whether Odisha, which recently suffered cyclone Fani, will consider this option to raise resources. It is initially estimated that Odisha may have suffered losses to the extent of ₹17,000 crore due to cyclone Fani.
Isaac said in his FY19-20 budget speech on 31 January that the cess will not apply to small dealers who have signed up for the GST composition scheme.
