The Goods and Services Tax (GST) Council will discuss the proposal of levying disaster cess in the upcoming meeting scheduled for Friday. Flood-hit Kerala had proposed the idea of levying cess to financially aid the state in the wake of the natural disaster. Kerala has asked the GST Council to consider either an all-India GST cess or, at least, a cess on SGST to help fund the flood-ridden state.
While Kerala had opposed the sugar cess earlier, it is now proposing a disaster cess. Kerala Finance Minister Thomas Issac defended the idea of demanding a disaster cess in the wake of floods in the state by saying that his proposal is to impose 10% cess on SGST, which will not have any implication on revenues of other states and centre.
But there is a catch…
Even if the GST Council takes up the matter for discussion, it is unlikely to take a decision on this on Friday itself as it will require a legal amendment to the GST Act.
“A final decision on the cess levy is unlikely in one meeting as even an option like legal amendment will take time to be implemented,” The Indian Express reported quoting a senior official. The concept of cess goes against the idea of the spirit of the uniform taxation system. However, the GST Council can take a decision on levying cess.
Recently, when the idea of cess over the GST was mulled by the GST Council to provide financial help to the ailing sugar industry but it was opposed by some states. States like Kerala and Andhra Pradesh argued that cess will distort the GST structure, set the wrong precedent and will be detrimental to some states.
As a result, the GST Council decided to seek the opinion of the Attorney General KK Venugopal. The AG has not yet given his opinion but the Group of Ministers (GoM), tasked by the GST Council, rejected the idea.
However, even the idea of imposing a cess on SGST will require amendment along with tweaks in the GST Network (GSTN). Moreover, there are concerns that if cess is levied on SGST, both consumers and businesses might migrate to neighbouring states.
