Imposed on inter-state movement of goods, the cess will help the government to provide help to the flood-affected people by “reconstruction, rehabilitation and compensation”.
Kerala government will levy 1% cess on GST beginning 1 June to raise funds and reverse the devastation caused by flood last year. With this, Kerala has become the first state to levy calamity cess. Imposed on inter-state movement of goods, the cess will help the government to provide help to the flood-affected people by “reconstruction, rehabilitation and compensation”. The government looks to raise over Rs 600 crore in a year via the additional income. Kerala was hit by severe floods in 2018. Affecting the lives of millions, the flood was the worst in the history of 100 years. The government had declared it a Level 3 calamity.
Which items will not draw cess?
The state government will not levy cess on daily items that draw 5% total GST. Daily essentials such as wheat, edible oil etc come under this category. This 5% GST is broken into two; the first half of which goes to the state government and the other half is taken by the central government. However, this does not include services such as economy air travel even though they attract 2.5% state GST. According to the government notification, 1% cess will be charged on these services.
What about other items?
All other goods and services which draw 6,9 and 14% SGST will charge 1% cess. Precious metals — gold and silver — will attract 0.25% cess. Government charges 1.5% SGST on these metals.
The Kerala government had announced the flood cess in the February budget of the state. The same was approved by the Finance Minister Arun Jaitley early in January 2019 in the GST council meeting. “The levy is permitted under the Goods and Services Tax law,” Arun Jaitley had said then. GST norms allow a special levy that can be imposed to raise additional resources to grapple with the loss of natural disasters. The state will be levying the flood cess for a period of two years.