COVID-19 effect: Centre mulls levying calamity cess to tide over crisis

COVID-19 effect: Centre mulls levying calamity cess to tide over crisis
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New Delhi: The Centre is considering to levy calamity cess on the Goods and Service Tax (GST) to tide over the financial crisis triggered due the COVID-19 pandemic, according to sources in the Union Finance Ministry.

This will be similar to the flood cess imposed by Kerala earlier. Kerala is the only state to have implemented such a cess. As per the Article 279A(4)(f) of the Constitution, the GST council can make recommendation to implement a cess during any natural calamity.

As per the GST council's recommendations, amendments were made to the GST law and Kerala was allowed to levy 1 per cent cess from last August.

The cess was slapped on all commodities with more than 5 per cent GST.

A minimal cess is unlikely to cause a huge impact on the consumers. The GST council is likely to meet in the coming weeks.

The central government is also considering to make market borrowings for giving the GST compensation to the states, sources have said. A suggestion to extend the deadline for the compensation is also under consideration.

The compensation is calculated based on the 14 per cent growth rate of the state's revenue. If the revenue growth rate is less than 14 per cent, the deficit is given as compensation.

Currently, the Centre has to give compensation to the state for up to 2022. Though the states had raised the demand to extend this during the 15th Financial Commission, the Centre had objected to this.

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