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Calamity Cess on GST: A plan to tide over COVID Crisis

Anshu Gupta (CA-Final) 
on 25 May 2020

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Calamity Cess

There are powers granted under Article 279A(4)(f) of the constitution, the GST Council can levy a special tax during any natural calamity or disaster. In order to raise additional revenue from Goods and Service Tax (GST), central government was considering to impose a Calamity Cess on GST @1% to tide over the economic crisis faced due to Corona Virus pandemic excluding the goods and services covered under 5% slab rate of GST.

Calamity Cess on GST: A plan to tide over COVID Crisis

Imposition of Calamity cess is similar to disaster relief cess introduced in Kerala last year following the monsoon floods of 2018, Kerala started levying 1% cess on GST for two years from 1st August, 2019 on the value of Goods & Services taxed at 12%, 18% & 28%. To avoid cascading of tax, the calamity cess is levied only on the value of supplies made within the state by registered dealer i.e. Intrastate supplies.

 

Difficulty in Compliance

• Due to the lockdown, many businesses which are facing low sales volume, a crisis for demand of goods & labour challenges would be adversely affected with the applicability of Calamity cess.

• While this additional levy may help government in raising funds, companies & GSTIN will also need to modify their IT systems for incorporating this change.

• Also, no other country has tried yet to increase their taxes from present tax regime during COVID19 to manage their resources.

• The situation of economy at present is not so appropriate to pay any cess as there are already pay cuts, retrenchments, incurring losses and need funds for the survival of companies itself.

 

Clarification/ Relief Offered

Ministry sources stated that Central Government has withdrawn the proposal of levying Calamity cess as within the current financial state of affairs throughout the COVID-19 pandemic, such purposal of introducing a calamity cess can be nothing but an adversity itself. Any such measure will weaken the shopper’s sentiment and market’s energy. Levying of Calamity cess can result in another calamity for the retailers and customers to pay additional tax on GST. 


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