By Mahima Kapoor and Nikunj Ohri
The Indian government has set up a a seven-member committee to debate a national disaster cess.
The panel will look into the “modalities for revenue mobilisation in case of natural calamities and disasters”, the finance ministry said in a media statement. Bihar Deputy Chief Minister Sushil Kumar Modi will be heading the panel, it added.
The other members are:
- Himanta Biswa Sarma, Finance Minister, Assam
- T.M. Thomas Isaac, Finance Minister, Kerala
- Sudhir Mungantiwar, Finance & Excise Minister, Maharashtra
- Sashi Bhusan Behera, Finance & Excise Minister, Odisha
- Manpreet Singh Badal, Finance Minister, Punjab
- Prakash Pant, Finance Minister, Uttarakhand
The release added the the group of ministers will submit their report by Oct. 31.
Earlier today, Finance Minister Arun Jaitley had said that the committee will have representation from the north-eastern states, coastal states and hilly states, which are relatively prone to disasters. “The view we take today will set a precedent for the country for a very long time,” he had said in a press conference after the 30th Goods and Services Tax Council meeting, adding that it was important to not implement a cess in haste.
The committee will suggest guidelines for such a cess with two factors in mind, said Jaitley. They are:
- Whether the tax should be levied pan-India, and if so, should it be on luxury and sin goods.
- If there should be a distinction for natural calamities where the National Disaster Relief Fund is deemed sufficient.
This comes after Kerala was affected by its worst flood in nearly a century. State Finance Minister Thomas Isaac had asked the central government to allow it to increase its share of the GST on some items or impose a national-level cess on select commodities to fund rehabilitation.
Six States Report Revenue Surplus
The matter of helping states bridge revenue shortfall that they are currently reporting was also discussed at the meeting. Six states, mostly consumption-led, are reporting revenue surplus in April-Aug. 2018 period, Jaitley told reporters.
The states are:
- Arunachal Pradesh.
- Andhra Pradesh.
The remaining 25 states are reporting a revenue shortage ranging from 3 percent to 42 percent. Telangana and Puducherry reported the least and maximum revenue shortage, respectively.
Revenue Secretary Hasmukh Adhia visited five states that were reporting revenue shortfall— the gap between the anticipated 14 percent increase in states’ revenue and its actual indirect tax collections—and submitted a report on his findings at the meeting.
The central government compensates states for any shortfall they report in indirect taxes subsumed under GST, keeping the base year as 2015-16, and calculating a 14 percent increase every year for first five years of the implementation of the new indirect tax.
One of the reasons states are reporting the shortfall is they had special powers to levy taxes like purchase tax or entry tax which inflated their tax base in 2015-16, Jaitley told reporters. As these taxes got subsumed under GST, they are facing difficulty in meeting the projected 14 percent increase in indirect taxes.
While the overall tax collection trends are positive, there is continued pressure on the government to boost its revenue, said Archit Gupta, founder of ClearTax, a taxation and financial solutions firm. “It remains to be seen how that plays out on annual return and reconciliation compliances and if it leads to heightened scrutiny for businesses.”
The panel that will study ‘Modalities for Revenue Mobilisation in case of Natural Calamities and Disasters’ will be headed by Bihar Deputy Chief Minister Sushil Modi and comprises the finance ministers of Assam, Kerala, Maharashtra, Odisha, Punjab and Uttarakhand as members. The panel must submit its report by Oct. 31.
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