The highest Goods and Services Tax authority, GST Council held a meeting today and the seven attendee minister suggested to introduce levy of higher cess for luxury items to raise more money for natural calamities like the Kerala flood rehabilitation funds.

After the Kerala flood disaster, the Kerala State government has been asking Centre to provide financial aid and funds for relief following severe loss of life and property. A panel of officials of the union finance ministry have been trying to figure out ways to meet financial needs for rehabilitation in flood-hit regions of Kerala. During the meeting, the ministers suggested the GST Council to increase the cess and tax levied from luxury items like premium SUVs and sedans to raise more funds for natural calamity relief purposes.

For this, the GST Council has decided to fabricate a “group of ministers” (GoM) who will form mechanisms to help state governments which need funds for disaster relief post natural calamities. The GoM will discuss various factors and analyse the position and capabilities of governments to raise amounts to meet the shortfalls. The team will also consider the possibility of the additional cess being snowballed as a political tool by states.

So the exact contours and shape of the cess will be designed and proposed by the GoM, but it will be finalised and approved by the Goods and Services Tax (GST) Council. Another crucial aspect is whether cess will come with a sunset clause, a decision that will be taken by the Council. While on the other hand, the government may not be in a position to cut rates, some states have demanded a reduction in the rate levied for cement from 28 percent slab to 18 percent.