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GST Council nod to calamity cess a precedent for other states: Kerala FM

Gireesh Babu/Chennai 11 Jan 19 | 02:23 PM

Kerala Finance Minister T M Thomas Isaac

The decision of the GST Council approving a levy of one per cent calamity cess for two years would help the state to raise around Rs 1,000 crore in two years and would set a precedent which might be helpful to other states also in future when the need arises, said Kerala Finance Minister T M Thomas Isaac. He said the state is happy with the decisions taken in the 32nd GST Council meeting.

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The state, which saw losses to the tune of around Rs 30,000 crore due to heavy floods in August last year, is expected to start rebuilding activities with provisions from the budget for FY20.

Speaking to Business Standard, he said the problem with GST was that it did not give states the flexibility to raise additional resources to address local problems such as natural calamities. As part of revenue mobilisation for natural calamities, the GST Council on Thursday approved a cess on the intra-state supply of goods and services within Kerala at a rate not above one per cent for a period not exceeding two years.

"So, a precedence has been set. Kerala is permitted for an additional cess for the state's rebuilding and it does not affect other states. If we have a high-level tax addition, that could be a diversion, but here it is a low rate. If any state experiences serious trouble, they can take a course such as this by approaching the GST Council. This is a very welcome move," he said. The cess would help Kerala raise Rs 1,000 crore in two years. While the amount may not be significant given the magnitude of losses due to the heavy rains and floods in 2018, it is better than having no funds.

The state has seen the worst floods in a century, during the month of August 2018, affecting the lives of several lakhs of people. Relief works are over and rehabilitation is halfway through and now the question is of rebuilding infrastructure, and the state is negotiating loans from outside. 

On Thursday, the GST Council recommended to the Centre that states like Kerala should be allowed to have borrowings outside the FRBM limits for rebuilding purposes, he added.

The state has started the process of rebuilding infrastructure that was mostly washed away or destroyed due to floods. Announcements regarding rebuilding would be with the budget for FY2019-20, said the finance minister.

Other decisions taken in the Council meeting on Thursday include the increase in the turnover limit for the existing composition scheme to Rs 1.5 crore and the composition scheme for services having an annual turnover in the preceding financial year up to Rs 50 lakhs to be taxed at the rate of six per cent. 

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