Post-disaster rehabilitation tax report to be finalised on 6 January

The group of ministers will deliberate on 2 options - either to allow a state afflicted by calamity to raise the rate of SGST, or to levy a nationwide tax irrespective of where the disaster has stuck

A panel headed by Bihar Deputy Chief Minister Sushil Kumar Modi will meet on Sunday to finalise a report to mobilise revenues for post-disaster rehabilitation and reconstruction. The need for a special tax was felt after heavy losses in the Kerala floods of August last year.

The group of ministers (GoM) will deliberate on two options — either to allow a state afflicted by a calamity to raise the rate of the state goods and services tax (SGST) without changing the rate of the central GST (CGST), or to levy a nationwide tax irrespective of where the disaster has struck.

Sources close to the development said the first option might be a more popular one.

“As things stand, most states are keen on giving a calamity-affected state the power to levy a higher SGST for a prescribed period,” said a senior official. The report prepared on Sunday will be discussed in the GST Council meeting on January 10, where the nature of the calamity tax will be finalised.

The second option — of levying a pan-Indian tax — might not be so popular, said sources in the know. “In case of a nationwide tax, the issue is who will distribute the funds from the corpus, and on what basis,” said an official.

Kerala Finance Minister Thomas Isaac, who advocated this tax, is also a member of the GoM, besides his counterparts from Assam, Maharashtra, Punjab, Odisha, and Uttarakhand.

The GoM was set up on September 28 last year during the 30th GST Council meeting. It met on October 15 to discuss the possible options, and sent out questionnaires to all states to find out their preference.

A third option discussed was strengthening the existing National Disaster Response Fund (NDRF).

The NDRF used to get funds from the national calamity and contingency duty levied on some “sin” goods. The NDRF inflow has ebbed since a part of the NCCD has been subsumed under the GST.
 

While the state disaster response fund (SDRF) is in place as well, states and the Centre have arrived at a consensus that the combination of the NDRF and the SDRF is insufficient for the rehabilitation and reconstruction work, and can cater to relief works only, underlining the need for a new revenue channel.