Kerala is still in the path of repossession after the trauma it got from the floods last year. A year after the incident, the major headway happening ‘in the now’ and ‘in this regard’, is the Kerala Flood Cess that the state government is going to impose in the coming month.

What is Kerala Flood Cess?

State Government has declared an extra 1% Kerala Flood Cess, above and over GST for intra-state consumption of goods and services. The Government expects the companies to comply on the new rule for 2 years for the sole purpose of rehabilitation, reconstruction and compensation of the state. The Kerala Flood Cess is likely to come in to effect from the 1st of July, 2019.

 It is estimated by the GST council that the state can amass at least 2000 Cr in 2-3 years of practice of Kerala Flood Cess. However, the state government has a different viewpoint regarding the collectable amount and is expected to be around Rs. 600 Cr.

The companies rooted and present in Kerala will have to act in accordance with the new rule by re-orienting their pricing, ERP software and other business processes. The cess will be on Business-to-Consumer (B2C) transactions and the government entails the real estate, banking, telecom and aviation companies to comply as well. There will be no input tax credit on the flood cess.

Kerala Flood Cess Eligibility Criteria:

• Cess does not cover goods that figure in the tax slabs below 5%
• Composition Tax holders are exempted from the cess
• Gold, silver and platinum ornaments that figure in the fifth schedule of GST will have a cess of 0.25%
• Those in 12%, 18% and 28% tax slabs will have 1% cess
• All taxable services will have 1% cess
• Supplies of goods or services or both which are NIL rated under Kerala GST Act is exempted from cess
• Supplies of goods or services or both by a registered person to another registered person is cess exempted

The taxable person are expected to pay the Kerala Flood Tax by filing a monthly return in KFC A on or before the filing of GSTR-3B specified under Kerala GST rules 2017. The tax return is to be uploaded in the Kerala Government’s tax website where the corresponding e-payment shall be generated.

What are the Possible Shortcomings?

There is always compliance liability on companies when the government initiates a new policy and Kerala Flood Cess is no exception in this regard. Companies operating in the Kerala State is also worried about other states going ahead as the aftermath of such state-specific cess system. Kerala is the first state to levy and therefore this confusion is only admissible.

Another difficulty related to flood cess is the separate MRP the big producers (like the telecom companies) will have to issue for the Kerala consumers. Currently there are only centralized bills, but with the introduction of flood cess, the billing system will require a complete reformation.

Importance of a Calamity Cess:

Kerala’s tactics of ‘emerging from the ashes’ after the floods is commendable considering the benefits it can provide the flood-affected proportion of the state. Like already mentioned, Kerala is the first state to exercise a calamity cess and is expected to meet the anticipated funds in few years – a brainy way of calamity management !

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How to Calculate Kerala Flood Cess?