Kerala govt to impose 1% flood cess from June 1 for rehabilitation work

There will be no cess on goods drawing 2.5 per cent SGST

The Kerala government will impose a cess of up to one per cent on inter-state movement of goods and services to final customers from June to provide relief and rehabilitation to those affected by flood in the state last year.

There will be no cess on goods drawing 2.5 per cent state GST, which includes essential items such as branded wheat, edible oil etc, according to a notification issued by the Kerala government. These items attract total five per cent GST, broken up into 2.5 per cent SGST and CGST each. 

However, services attracting 2.5 per cent SGST such as economy air travel will attract one per cent cess. All other goods and services drawing 6, 9 and 14 per cent SGST would attract one per cent cess. Also, gold and silver on which 1.5 per cent SGST is there, would attract 0.25 per cent of cess. 

There will be no input tax credit on the cess. 

Abhishek Jain, partner at EY, said, "With this cess, companies with presence in Kerala would need to quickly plan and gear their pricing, ERP system, business processes to factor and alighn it with this new levy."

The CPI(M)-led LDF government had announced the "flood cess" announced in the state budget in February to mobilise additional revenue. The state has projected around 24 per cent increase in revenues from GST to Rs 65784.60 crore in 2019-20 against Rs 53110.58 in the revised estimates of the previous year. 

Unlike other tax announcements, this cess was not effective from April one. Earlier, the issue of flood cess was discussed at a panel constituted by the GST Council. After its recommendations, the Council allowed Kerala to levy up to additional 1 per cent calamity cess under the GST regime for two years.  

Kerala is the first state to announce the flood cess.