Panel of Ministers Study Need for Disaster Levy in GST

Following the 30th meeting of the Goods and Services Tax (GST) Council earlier today, the Union Finance Minister, Arun Jaitley said that a seven-member ministerial panel would examine and consider the ramifications of including a cess for natural disaster relief in the GST regime. The request for a 10% cess in GST was raised by Kerala, a state that was ravaged by flooding due to heavy rains during the regular monsoon season there. However, at the time that the suggestion was made, the Finance Minister said that it required careful consideration as the actions taken by the government would in effect become precedent. The Finance Minister’s specific comment on this matter was, “his is not something that is to be decided on the spur of the moment.”

The ministerial panel will examine, among other things, whether this cess will be levied at the state or national level, as one of the primary concerns with a state-level levy would be that trade could shift to another state where trade would be more favorable. Another consideration was to make the cess seasonal, or for a limited duration, which could prove to be problematic to businesses which may have to deal with fluctuating levels of complexity in the periodic GST payments they would have to make correctly.

An additional consideration has been whether or not there is a real need for this kind of cess as there exists the National Disaster Relief Fund (NRDF), and the panel would have to consider if it was more effective to adjust aspects of this fund, or to put in place a disaster relief mechanism in a regime of taxation that was supposed to be far more simple than what existed before.