The calamity cess on GST, aimed at raising funds to rebuild Kerala from the devastation caused by last year’s floods, will be levied by the state’s taxes department from June 1. All items with a GST slab above 5% will be taxed an additional 1% for two years. Kerala became the first state to impose cess on GST after the new tax regime was put in place. The calamity cess was announced by finance minister T M Thomas Isaac in this year’s state budget in January. However, the decision to implement the cess with effect from April 1 was put on hold in view of the Lok Sabha election. The state GST department issued on Monday an order imposing 1% cess on services and goods that figure in the tax slabs above 5%. Gold, silver and platinum ornament too will carry a levy of 0.25% as calamity cess.
The GST council had authorised Kerala to collect calamity cess for two years on the recommendation of a committee of finance ministers. The state government expects to raise Rs 600 crore a year via the cess and the amount collected will be used by the government for various activities under the Rebuild Kerala programme. The cess amount will add to the money from the CM’s distress relief fund and the re-routed loan amounts from global agencies like World Bank and ADB for financing Rebuild Kerala projects. The order also makes it clear that to avoid a cascade effect, the calamity cess will be levied only on retail transactions happening within the state. Though the move will lead to a rise in prices, sources in the finance department said essential commodities like rice won’t be affected as they are in a lower GST bracket.