GST Council Establishes Group of Ministers to Evaluate Cess for States Affected by Natural Calamities

The GST Council has decided to establish a Group of Ministers (GoM) to explore the possibility of states imposing a cess under the Goods and Services Tax (GST) framework. This initiative aims to help states manage financial challenges following natural disasters. Finance Minister Nirmala Sitharaman announced this decision after the 55th GST Council meeting, highlighting that there was unanimous agreement on forming the GoM.

Representative image

Andhra Pradesh Finance Minister Payyavula Keshav mentioned that there was a consensus on creating a GoM to examine the proposal for a 1 per cent calamity cess on luxury goods. This suggestion came in response to recent floods in Andhra Pradesh during September and October. Keshav stated, "To give us a leverage to come back to normalcy, we have suggested a 1 per cent cess."

Calamity Cess Proposal

The proposed cess would target luxury items and be specific to each state. The GST law allows for special taxes during natural calamities or disasters to generate additional resources. This provision is intended to support states in recovering from such events by providing financial relief.

In 2018, Kerala made a similar request, leading to the formation of a GoM by the GST Council. By January 2019, this group approved Kerala's levy of a 1 per cent calamity cess for two years. The funds were used for rehabilitation work following severe floods in the state. Kerala determined which goods and services would be subject to this additional charge.

Role of the Group of Ministers

The newly formed GoM will deliberate on various aspects of the proposed cess, including its name and applicability to different disasters. States like Uttar Pradesh, West Bengal, and Telangana have volunteered to participate in this group. The GoM will present its findings and recommendations to the GST Council for final approval.

Sitharaman emphasised that all members, including Andhra Pradesh's minister, agreed on forming this group. She stated, "The Group of Ministers will decide what this cess should be named, whether every disaster can be given a consideration." This collaborative approach aims to ensure comprehensive evaluation and implementation of the proposed measures.

The initiative reflects an ongoing effort by the GST Council to address financial distress caused by natural calamities through targeted fiscal measures. By allowing states to levy a specific cess, it seeks to provide them with necessary resources for recovery and rebuilding efforts.