Kerala has begun implementing 1 per cent flood cess, apart from GST

A year after the worst floods in almost a Century, Kerala has become the first state to impose an additional cess. Starting August 1, Kerala will be implementing 1 per cent Flood Cess, apart from the Goods and Services Tax (GST), with the aim to generate funds for rebuilding the state.

"It has taken us almost a year to work out a special cess within the framework of GST. The delay is understandable, because it is for the first time that the GST council is giving permission to a state government to have an additional cess, apart from GST," Finance Minister Thomas Isaac told NDTV.

More than 300 people had died and more than 3 lakh people became homeless in the floods that raged for more than 10 days. The state government estimated that the floods caused losses to the tune of Rs 19,500 crore.

The state, the minister said, had a "special situation" with a big natural disaster and the expenditure suddenly shot up. "How do we meet this expenditure? There must be some manoeuvrability for the state government," he said.

Essential household items which are not under the purview of GST -- like rice, salt, vegetables or fuels like petrol, diesel or even items which fall under 5% GST tax bracket, like cooking oil or medicines, will not be included for flood cess.

The flood cess will be implemented for items which fall in the GST slab of 12% or above.

"We expect to collect 700 crore rupees in one year. The flood cess will be implemented for two years, so we are looking at something around Rs 1400 crore," Mr Issac said.

The funds would be meant for financing construction activities for flood-affected roads and even village roads. "We have already allocated 1000 crore for PWD works, another 1400 crore for village roads," Thomas Isaac said.

"During last state government's period, VAT rates increased by 2%. Right now, rates of GST - the real effective tax rate is 4-5 points lower than the pre-GST combined tax. One additional percentage will not be a very heavy burden, but must be seen as contribution to rebuilding the state," the finance minister added, responding to the criticism from the Opposition. Ramesh Chennithala, the Opposition Leader, has alleged that the people in Kerala are not benefiting from the "price-hike policies" of the Centre and the state government.