SUBJECT:

• GS-3: Economy (Taxation, Disaster Management)
• GS-2: Governance (Federalism, Fiscal Policy)

Key Highlights

Formation of the GoM

• The GST Council constituted a Group of Ministers (GoM) to devise revenue mobilisation strategies for natural calamities.
• The decision was made in a meeting on December 21, 2024, to ensure a structured fiscal response during disasters.
• The GoM is led by Uttar Pradesh’s Finance Minister Suresh Khanna, with members from Assam, Chhattisgarh, Gujarat, Kerala, Uttarakhand, and West Bengal.

Terms of Reference (ToR)

• The GoM will evaluate the legal framework for a special calamity cess.
• Key considerations include:
  • Applicability: Whether the cess should be sector-specific or applied broadly.
  • Transaction Type: Whether it should cover B2B (business-to-business) and/or B2C (business-to-consumer) transactions.

Framework for Natural Calamities

• The GoM will establish guidelines to classify events as natural calamities, ensuring uniform application of the cess.
• This framework will provide clarity and consistency in revenue generation for disaster response.

Recommendations on Calamity Cess

• The GoM will propose the rate structure and duration of the calamity cess.
• The objective is to balance immediate disaster relief needs with long-term economic stability.

Alternative Mechanisms for Disaster Relief

• The GoM will explore non-tax alternatives for financial assistance.
• The aim is to strengthen disaster response without compromising the GST system’s integrity.

Precedents and Previous Experiences

• The GST framework permits special taxes during disasters.
• Kerala Example (2018-2019):
  • A GoM was formed after Kerala’s floods (2018).
  • In 2019, Kerala levied a 1% calamity cess for two years to support rehabilitation.
  • This precedent serves as a reference for the current GoM’s policy discussions.

Reconstitution of the Revenue Analysis GoM

• The GST Council also restructured another GoM to analyze GST revenue trends.
• Led by Goa’s Chief Minister Pramod Sawant, this group includes finance ministers from various states.
• Focus Areas:
  • Sector-wise revenue patterns.
  • Regional disparities in GST collection.
  • Policy measures to reduce tax evasion and improve compliance.

Mains Mock Question

“Discuss the need for a calamity cess under the GST framework. How can India balance revenue mobilisation for disaster management with economic stability?”