GST Council sets up GoM to draft uniform policy on calamity cess

The GST Council has set up a seven-member Group of Ministers (GoM) led by Uttar Pradesh Finance Minister Suresh Kumar Khanna to develop uniform policies for imposing a special calamity cess in the event of natural disasters in a particular state.

Finance Ministers from Assam (Ajanta Neog), Chhattisgarh (O P Choudhary), Gujarat (Kanubhai Desai), Kerala (K N Balagopal), Uttarakhand (Premchand Aggarwal) and West Bengal (Chandrima Bhattacharya) are also a part of the group.

Responsibilities of the GoM

The GoM will be in charge of examining the constitutional and legal feasibility of states levying such a cess to generate revenue during a natural calamity. It will also determine whether the special cess should be restricted to some specific sectors or implemented broadly and if it should be limited to B2B supplies or B2C supplies or both.

The GoM will also work on establishing a framework to define what qualifies as a natural calamity/disaster for the purpose of levying the special cess by states under the GST regime. Additionally, it will look into whether an alternative mechanism can be formed to help the states in case of a natural disaster without altering the basic structure of GST.

A brief history of the GoM

On December 21, 2024, the GST Council decided to set a GoM to examine uniform policies for levying a cess in case of a natural disaster in a particular state.

In the meeting in December, Andhra Pradesh Finance Minister Payyavula Keshav asked for a 1% calamity cess on certain luxury goods consumed in the state. The excess revenue generated would be used to fund relief work following the floods in the state in September-October, 2024, Keshav had said.

Previously in 2018, the GST Council set up a similar GoM to address demands from Kerala after severe flooding. The GoM in January 2019 approved a 1% calamity cess in Kerala for two years to fund the rehabilitation efforts in the state hit by floods. The state determined which goods and services would be subject to the cess.

Under the GST law, states are allowed to impose special taxes for a specific period of time to raise additional funds during a natural calamity or disaster.