Prices of cigarettes, luxury cars, more to be hiked? Calamity Tax axe hangs heavy on sin goods

Much talk was generated around the proposal for a so-called Calamity Tax that sought to impose a cess on sin goods and other luxury items. Cigarettes and luxury cars were the likely 'victims' - their prices would have been hiked to generate extra revenue that could be given to Kerala to fund its infra restructuring exercise post the destruction due to the horrific monsoon floods. However, they seemed to have escaped for the moment as no such decision was taken at today's meeting of the Goods and Services Tax (GST) Council. Instead, it was decided to set up a seven-member Group of Ministers to suggest way forward on cess demand for Kerala flood rehabilitation. Finance Minister Arun Jaitley later told reporters that the council discussed the proposal from Kerala to levy Calamity Tax, a special tax or cess to raise additional resources to meet the cost of reconstruction in the state in the wake floods.
 
The Finance Minister said that apart from senior Union ministers, the panel would comprise members from the North Eastern, hill and coastal states which are most vulnerable to natural calamities. The GoM would evaluate all possibilities and submit its recommendations in the next few weeks after which another GST Council meeting will be called.
 
He said since this would set a precedence, a GoM was formed to give suggestions, adding "There was also a discussion on if the cess should be imposed in the case of all natural calamities or if there should be a distinction. For example, if one or two districts of a state are affected, should there be a levy in that case." 
 
The FM said that there was a need to have best legal methodologies to address the issue while keeping the constitutional provisions in mind.
 
Jaitley said the Council also reviewed revenue trends and deficit of states, while adding that state deficit this year is 13 per cent and may reduce further as consumption picks up. Notably, GST collections in many North-east states is above expectation. 
 
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In its 29th meeting, the GST Council had approved cash back offer to poor sections of society if they make digital payments through Rupay Debit card, BHIM, Aadhaar, UPI and USSD.