We all are very well aware of the severe flood which badly affected the State of Kerala in the month of August 2018. The Government of Kerala, to provide the reconstruction, rehabilitation and compensation needs which have arisen due to flood, has levied a cess called the ‘Kerala Flood Cess’.
After several extension, ‘Kerala Flood Cess’ would now be effective / levied from 1st August 2019. Recently, vide notification no. 31/2019 – Central Tax dated 28th June 2019, the Central Board of Indirect Taxes and Customs notified the Central Goods and Service Tax (Fourth Amendment) Rules, 2019.
Vide the said notification, the board inserted new rule 32A which deals with the value of supply in cases where the Kerala Flood Cess is applicable. The present article highlights the basic provisions of ‘Kerala Flood Cess’ and explains the impact of the newly inserted rule 32A.
Basic Provisions of ‘Kerala Flood Cess’ –
Applicability of ‘Kerala Flood Cess’ –
‘Kerala Flood Cess’ is applicable on all the intra-state supplies of goods and services or both made by the taxable person to an unregistered person i.e., B2C supplies.
‘Kerala Flood Cess’ shall not apply to goods or services or both supplied under the composition scheme.
Rate of ‘Kerala Flood Cess’ –
‘Kerala Flood Cess’ is levied at different rates which are summarized hereunder –
| Sr. No. | Description | Rate of Kerala Flood Cess |
| 1 | All taxable services under SGST | 1% |
| 2 | All goods taxable @ 1.5% SGST | 0.25% |
| 3 | All goods taxable @ 6% SGST | 1% |
| 4 | All goods taxable @ 9% SGST | 1% |
| 5 | All goods taxable @ 14% SGST | 1% |
Other essential points to be noted –
- The ‘Kerala Flood Cess’ shall remain valid (effective) for a period of 2 years.
- The ‘Kerala Flood Cess’ needs to be reflected separately in the invoice.
- The ‘Kerala Flood Cess’ is to be paid to the Government along with the filing of return in FORM GSTR-3B.
- Every taxable person who is liable to pay the ‘Kerala Flood Cess’ is required to file an additional monthly return in FORM KFC-A.
Value of supply in cases where the ‘Kerala Flood Cess’ is applicable –
New rule 32A has been inserted, vide the Central Goods and Service Tax (Fourth Amendment) Rules, 2019, which defines the value of supply in case of applicability of Kerala Flood Cess.
As per the new rule 32A, the value of supply of goods or services or both on which Kerala Flood Cess is levied shall be deemed to be the value determined in terms of section 15 of the Central Goods and Service Tax Act, 2017. However, the newly introduced rule 32A states explicitly that the said value of supply shall not include the Kerala Flood Cess.
In simple terms, the above rule 32A means that the value determined in terms of section 15 shall be the taxable value of supply of goods or services or both on which CGST and SGST are to be calculated, and the said value shall not include the Kerala Flood Cess.
Let us understand the same with an example –
| Taxable Value of supply of goods | INR 100 |
| Effective Kerala Flood Cess (INR 100 * 1%) | INR 1 |
| Taxable Value for the calculation of CGST and SGST | INR 100 |
| CGST @ 9% | INR 9 |
| SGST @9% | INR 9 |
| Total value (INR 100 + INR 1 + INR 9 + INR 9) | INR 119 |
The effect of above newly inserted rule 32A is that the taxable value for the calculation of CGST and SGST would be INR 100 i.e., the value shall not include Kerala Flood Cess.
Author Bio
The Kerala government would need to issue equivalent notification/ amendment under their SGST. Till such time, the KFC would legally be part of the taxable turnover. Just because CGST notification has been issued, doesn’t mean it would automatically apply for SGST also.