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.

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. Traders are excluded from the cess who have opted for composition scheme. Kerala Flood Cess would not be applicable for interstate supply.

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

The state government estimated that the floods caused losses to the tune of Rs. 19,500 crore.

The proceeds from the cess will be used to fund post-flood rebuilding projects. Also the funds will be used to finance the construction activities for flood affected roads and even village roads in general.

The GST council had allowed the state to go ahead to levy the additional cess on goods and services transacted within its boundaries. 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.

However, it would amount to a double punishment for the people who could not still come out of the damages caused by the flood. It would trigger inflation and impose an additional burden on the people. A section of traders opposed the state government's decision to levy the flood cess, saying it would impose an additional burden on them.

However, Govt. warned that those who raise prices in the guise of the flood cess would face stringent action.

Kerala Flood Cess is to be calculated on the value of supply. The CGST and SGST collection shall not be included in the value of supply.