GoM on calamity tax under GST to meet on Monday

The ministerial panel under Bihar Deputy Chief Minister Sushil Modi will meet on October 15 to examine the modalities for revenue mobilisation by levying additional tax under the GST in case of natural calamities.

"The GoM on levying of tax or cess for funding natural calamity or disaster would meet on October 15," an official told PTI.

Last month, Kerala had mooted a plan for imposition of a cess on goods and services sold within the state to help it tide over the losses suffered due to the recent flood before the GST Council.

Following deliberations, the Council decided to constitute a seven-member Group of Ministers under Modi to look into the possibility of imposing a separate tax under the GST to help states hit by natural calamaties and also suggesting scenarios when this tax should be levied.

The panel would submit its report to the GST Council by October 31.

Assam Finance Minister Himanta Biswa Sarma, Kerala Finance Minister Thomas Isaac and Punjab Finance Minister Manpreet Singh Badal are part of the group.

Other members of the GoM are Odisha Finance and Excise Minister Sashi Bhusan Behera, Maharashtra Finance and Excise Minister Sudhir Murgantiwar and Uttarakhand Finance Minister Prakash Pant.

The panel would look into five issues flagged by the Council, including whether the new tax should be levied only in the state concerned or be an all-India levy, and whether it should be on specified luxury or sin goods only.

Besides, the grouping would look at whether National Disaster Response Fund (NDRF)/ State Disaster Response Fund (SRF) mechanism is sufficient to deal with calamities as well as define circumstances where the 'calamity tax' can be imposed.

Other issues such as the legal aspect of imposition of such a tax within the GST would also be looked at.

The imposition of cess under the GST was hanging fire for long as a case on constitutional validity of Goods and Services Tax (Compensation to States) Act was pending in Supreme Court.

Last week, the apex court upheld the constitutional validity of the levy of 'Compensation to States' Cess saying it is an increment to GST which is permissible under the law.

PwC Indirect Tax Partner and Leader Pratik Jain said the judgement puts the ambiguity around legislative competence around levy of GST compensation cess to rest and has held that cess could also be applied in situations where Clean Energy Cess was already paid on coal.

"The timing of this decision is important, as the Government is now contemplating imposition of a special Cess to compensate the States in case of natural calamities," Jain said.