The Kerala government is set to impose an additional 1% cess on goods and services within the GST slab above 5%. Scheduled for execution from June 1 and lasting for two years, this ‘Flood Cess’ aims to mobilize funds to rebuild the state following devastating floods in August 2018.
The funds generated will be directed towards the Chief Minister’s Distress Relief Fund and international loan amounts from agencies such as the World Bank and Asian Development Bank. These funds will finance Rebuild Kerala projects, striving to restore the state to its former glory.
The flood cess is only applicable to transactions executed within Kerala and does not extend to interstate transactions. Moreover, it excludes railway services and movie tickets.
Minimizing Cess Burden
In an attempt to mitigate the financial burden of the cess, products sold by small traders with an annual turnover less than Rs 1.5 crore will not be subjected to the additional tax. Furthermore, gold and silver will be levied a reduced flood cess rate at 0.25%.
Understanding Cess
Cess functions as a tax on tax, typically levied for specific purposes. Once its purpose has been fulfilled, the cess is discontinued. Unlike shared taxes between Indian states, the entire amount raised from a cess is kept by the centre before being transferred to dedicated accounts.
Types of Cess
Cesses were largely subsumed under the GST implemented from July 1, 2017. Examples include Krishi Kalyan Cess, Swachh Bharat Cess,Clean energy cess, Cess on tea, sugar, and jute.
| Cess | Purpose |
|---|---|
| Primary Education Cess | Support primary education |
| Secondary Education Cess | Support secondary education |
| Cess on Crude Petroleum Oil | Support energy sector |
| Road Cess | Support road infrastructure |
| NCCD on tobacco and tobacco products | Control tobacco use |
| Education cess on imported goods | Support education |
Last Modified: February 6, 2024