Andhra Pradesh Requests 1% Calamity Cess; GST Council to Form Group of Ministers (GoM)

Date: December 23, 2024
Category: GST Recent News
Read Time: 4 Minutes

In response to the devastating floods in Andhra Pradesh during September and October 2024, the GST Council has decided to establish a Group of Ministers (GoM) to evaluate the state’s proposal for a 1% calamity cess on luxury goods. This measure aims to support disaster recovery efforts.

Key Highlights

1. Andhra Pradesh’s Proposal

The Andhra Pradesh Finance Minister, Payyavula Keshav, proposed the cess as a crucial step to recover from the economic damages caused by the floods. The suggested 1% cess would be a state-specific levy, applying solely to luxury goods.

2. GST Council’s Consensus

The GST Council broadly agreed to the formation of a GoM to explore the legal and structural framework for implementing the calamity cess. This reflects the Council’s willingness to consider innovative mechanisms for addressing state-specific challenges.

3. Kerala’s 2018 Precedent

A similar calamity cess was introduced in Kerala in 2019 to fund rehabilitation efforts following severe floods. This 1% cess was imposed for two years on selected goods and services, setting a valuable precedent for Andhra Pradesh’s request.

4. GoM’s Key Responsibilities

The Group of Ministers will focus on:

  • Defining which disasters qualify for a calamity cess.
  • Establishing a process for declaring and approving such levies.
  • Designing a framework for GST Council oversight and regulation of the cess structure.

5. States Participating in the GoM

Finance Minister Nirmala Sitharaman confirmed that Uttar Pradesh, West Bengal, and Telangana have volunteered to participate in the GoM. This collaborative approach ensures diverse perspectives in the decision-making process.

GST Law Provisions

The GST law allows states to impose special taxes for a limited period to generate resources for disaster relief and rehabilitation. This provision supports states in addressing specific challenges while maintaining compliance with GST regulations.

Next Steps

The GoM will focus on the following areas:

  • Legal frameworks and naming conventions for the calamity cess.
  • Criteria for determining disasters eligible for such levies.
  • Recommendations for implementation, which the GST Council will review and finalize.

By leveraging GST mechanisms for disaster recovery, this decision highlights a balanced approach to addressing state-specific economic challenges while fostering nationwide cooperation.

Share on Facebook Share on Twitter