GST Council mulls calamity tax

​New Delhi: The GST Council Friday set up a seven-member ministerial panel to examine the legality of imposing a new tax on certain goods and services to raise resources for natural calamity-hit states like Kerala.

The panel, headed by Union Finance Minister Arun Jaitley and comprising of representatives of all states and UT, also took stock of the shortfall in tax mop up by majority of the states under the new indirect tax regime.

Briefing reporters after the 30th GST Council meeting, Jaitley said the demand of Kerala to allow imposition of higher taxes on goods and services within the state to help tide over the losses suffered due to flood was considered by the Council and it was decided that the matter should be referred to a seven-member Group of Ministers (GoM), which would include representatives from North-eastern, hilly and coastal states.

The committee will look into five issues flagged by the Council, including whether the new tax should be levied only in the state concerned or should it be an all-India levy, and that should it be on specified luxury or sin goods only.
The GoM will also look into whether National Disaster Response Fund (NDRF)/State Disaster Response Fund (SRF) mechanism is sufficient to deal with calamities and also define circumstances where the 'calamity tax' can be imposed as also the legal aspect of imposition of such a tax within the GST.

"We will have a seven-member group of ministers which in the next few weeks will make a recommendation," he said, adding that the grouping will include representatives from North-east, hilly states and coastal states as they are hit by calamities most.

While Jaitley said the GST law states that a special rate of tax can be imposed after permission of GST Council, Kerala Finance Minister Thomas Isaac said the law provides that the Council can impose a tax for a temporary period in the GST framework to help states in terms of exigencies.

"We have not thought out the details, therefore GoM will look into it. An additional 1 per cent tax on some commodities was discussed," Isaac said. On revenue position of the states, Jaitley said the states faced an average 16 per cent shortfall in Goods and Services Tax (GST) mop up in the first year of implementation (July 2017-March 2018).

The shortfall has come down to 13 per cent during April-August period of current fiscal. While only 6 states -- Mizoram, Arunachal, Manipur, Nagaland, Sikkim and Andhra Pradesh -- are facing revenue surplus in current fiscal, 25 states are staring at revenue shortfall and have to be compensated by the Centre.

The 10 states which are facing maximum revenue shortfall during April-August are Puducherry (42 per cent), Punjab and Himachal Pradesh (36 per cent each), Uttarakhand (35 per cent), Jammu & Kashmir (28 per cent), Chattisgarh (26 per cent), Goa (25 per cent), Odisha (24 per cent), Karnataka and BIhar (20 per cent each).

The state deficit has to be neutralised within five years of launch of the GST. "As it goes on a glide path downwards, the more it comes closer to zero at the expiry of the 5th year the more the states will be closer to achieving those targets," Jaitley said.