Jaitley proposes additional cess under GST to help flood-hit Kerala

Finance Minister Arun Jaitley has proposed additional cess on select commodities under GST to raise funds to help Kerala tide over the damages caused due to floods, a state minister said on Friday.

The proposal of levy of cess is expected to come up for discussion at the GST Council meeting on September 28.

"Kerala welcomes the suggestion of hon'ble FM for a national level cess on selected commodities for a specified period to help such states. GST Council to discuss," Kerala Finance Minister Thomas Isaac said in a tweet.

Isaac was of the view that GST should be made flexible to take care of "unforeseen urgent demand for resources as in the case natural calamities".

The issue regarding additional cess for funding rehabilitation activities in flood-hit Kerala was discussed on Thursday during a meeting of Isaac with Jaitley.

Isaac has also pressed for additional funds from the Centre to rebuild the state, which is estimated to have suffered a loss of Rs 200 billion (as per a preliminary estimate) due to the floods.

The initial proposal of the Kerala government that it be allowed to raise funds by imposing cess on sale of goods and services under GST by the state government did not find favour with the Union Finance Minister as it could complicate the whole structure of the new tax regime-- which is one nation, one tax.

The government may have to amend the GST law to permit imposition of a new cess in the new indirect tax regime. Rolled out from July 1, 2017, Goods and Services Tax (GST) has subsumed all cess, surcharge and local levies.

The GST currently has a four-slab rate structure of 5, 12, 18 and 28 per cent. Besides, luxury items, sin and demerit goods attract a cess on top of the highest tax rate.

According to industry sources, levying of new cess may not be an easy option as a case in this regard is pending in the Supreme Court. The government had earlier toyed with the idea of levying a sugar cess to help the industry earlier this year but abandoned the move after an announcement of increase in Minimum Support Price (MSP).