55th GST Council Showdown: Andhra’s Bold 1% Levy Stirs Waves of State Demands | Unprecedented Business Drama

In the 55th GST Council meeting held in Jaisalmer, Andhra Pradesh’s request to introduce a 1% Goods and Services Tax (GST) increase to fund recovery efforts following severe rains and floods sparked a series of similar demands from other states. Andhra Pradesh highlighted its financial difficulties due to unprecedented flooding and sought to impose a levy consisting of 0.5% Central GST and 0.5% State GST on luxury items. This proposal garnered support from states like West Bengal, Telangana, and Karnataka, all of which have faced their own natural disasters, prompting discussions on a uniform disaster-specific tax policy.

Finance Minister Nirmala Sitharaman stated that a Group of Ministers (GoM) would be formed to examine the legal and structural frameworks necessary for this levy. The GoM is tasked with defining what constitutes a “disaster” and considering how a cess might be collected, given the technical challenges, as cess collection legally belongs to the central government. The Council’s decision to explore these issues follows a precedent set by Kerala in 2019 when it successfully introduced a 1% flood cess after obtaining GST Council approval.

Several states, including Uttar Pradesh, expressed willingness to participate in the GoM to shape a policy that could provide a financial mechanism for states to address natural calamities without immediate reliance on central funds. West Bengal’s Finance Minister raised crucial legal questions about a state’s ability to impose such taxes under current GST regulations.

Finance Minister Sitharaman emphasized the necessity of establishing a procedural framework to prevent undue tax burden on the public, thus ensuring that the Council agrees on a standardized approach before any additional levy can be applied during disasters. The deliberations underline an urgent need for cohesive policy-making to support states in times of natural crises.

Original Source: https://indianexpress.com/article/business/55th-gst-council-meeting-andhra-makes-special-demand-for-extra-1-gst-levy-for-disasters-opens-floodgate-of-demands-by-other-states-9738126/
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Publish Date: 2024-12-22 04:00:00