A Year after Devastating August Floods, 'Flood Cess' Comes into Effect in Kerala

Thiruvananthapuram: A 1% "flood cess" on goods and services has been imposed in Kerala from Thursday to mobilise additional revenue for the rebuilding of the flood-hit state, which suffered a massive destruction in the August deluge last year.

The CPI(M)-led LDF government was eyeing to generate an additional revenue of Rs 600 crore annually through the "Kerala Flood Cess", which would be in force for the next two years, official sources said.

The amount mobilised through the new cess would be used to provide funds for the reconstruction and rebuilding exercise and for paying compensation to those affected by the floods, which had claimed over 300 lives and left many homeless.

The Goods and Services Tax (GST) Council had recently allowed the state to levy the additional cess on goods and services transacted within its boundaries.

Presenting the budget for the 2019-20 fiscal in January, state Finance Minister TM Thomas Isaac had announced the 1% flood cess for goods coming within the GST tax brackets of 12%, 18% and 28%, and a 0.25% cess on all goods coming under the fifth schedule of GST, including gold, silver and platinum ornaments, on the value of supply for a two-year period.

Though the new cess would lead to a price hike of over 900 commodities, essential ones like rice and vegetables are not expected to be affected as those fall under a lower GST bracket.

The Kerala Vyapari Vyavasayi Ekopana Samiti (KVVES), an umbrella organisation of traders, observed Thursday as "black day" against the state government's decision to levy the flood cess, saying it would impose an additional burden on them.

The state Hotel and Restaurant Association also urged the government to exempt the food served in hotels and restaurants from the cess.

Slamming the LDF government, Leader of Opposition in the state Assembly Ramesh Chennithala said the decision to go ahead with the new cess, despite public protest, was a "challenge" to the people.

The cess would be an additional blow to those who were yet to come out of the ravages caused by the flood, he said. "It will result in inflation and impose an additional burden of Rs 1,200 crore on the people," the Congress leader added.

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