While the taxpayers have been rejoicing with the introduction of GST that levy of Cess has been done away with, there are constitutional powers granted to GST Council for levy of cess during a national calamity/disaster. The said power has been exercised by the GST council and the state Government of Kerala, levying ‘Kerala Flood Cess’ (hereinafter abbreviated as ‘Cess’ or ‘KFC’ for brevity) for accumulating funds for re-developing Kerala on account of devastating floods in the state in August 2018. The provisions regarding the KFC has been discussed in details under –
1. Effective date and validity of Kerala Flood Cess
- While the said cess was originally proposed to be levied w.e.f 01 June 2019 as per Kerala Flood Cess Rules, 2019 (KFC Rules), the aforesaid Rules were subsequently amended on 31 May 2019 to postpone the effective date to 01 July 2019, due to the issues concerned with valuation for the purpose of GST (the same has been explained in detail in the ensuing paragraphs).
- Although the validity of the cess does not form part of the notification, it is intended that the said cess shall remain valid till 2 years.
2. Applicability and Rate of Kerala Flood Cess
- The Cess is applicable on all intra-state supplies of goods or services or both, made by taxable person to an unregistered person (i.e. B2C supplies).
- The Cess is required to be separately shown on the invoice.
- The rates are as under –
| Rate of GST (CGST+SGST) | Rate of KFC* |
| Goods taxable at 3% | 0.25% |
| Goods taxable at 5%/0.5% | Nil |
| Other taxable goods (12%/18%/28%) | 1% |
| All taxable services | 1% |
*The above rates are applicable on taxable value as per the provisions of GST Law.
3. Due date and Compliances related to Kerala Flood Cess
- An additional return in Form KFC-A needs to be filed by all the taxpayers liable to collect and pay the cess on or before the due date of furnishing of Form GSTR-3B, which is 20th of the subsequent month.
- The said return will have to be filed online on the official tax portal of Kerala keralataxes.gov.in and the payment of cess is required to be made at the time of furnishing the said return.
- Taxpayers are required to generate one time user ID and password on the portal for making payment and furnishing the return.
- Important to note at the time of filing KFC-A is to ensure that the said return matches with the details disclosed in corresponding head of GSTR-1 i.e. B2CS.
4. Valuation for Kerala Flood Cess
- KFC rules prescribe straight valuation mechanism for levy of the cess i.e. the taxable value as per the provisions GST Law.
- However, there exist an ambiguity on the value to be considered for levy of GST (CGST+SGST) which is explained as under –
- Section 15 of the CGST/Kerala SGST Act, provides for value on which GST is to be charged.
- The said sections include any taxes, cesses, fees and charges levied under any law other than GST Law i.e. other that CGST, SGST, IGST and UTGST law.
- Hence, by virtue of the above, GST has to be levied on value KFC too, which is will result in cascading of taxes and also, the same is against the principles of taxation. The same has been enumerated in the example –
| Particulars | Amount (without levy of KFC) | Amount (with levy of KFC-as per existing provisions) | Amount (with levy of KFC-after amendment in GST Law)# |
| Taxable Value (assumed) | 100 | 100 | 100 |
| KFC @1% | – | 1 | 1 |
| Taxable value for GST | 100 | 101 | 100 |
| CGST @9% | 9 | 9.09 | 9 |
| SGST @9% | 9 | 9.09 | 9 |
| Total Cost | 118.00 | 119.18 | 119.00 |
- From the above example, it is amply clear that for a goods/service with base price of 100, the cost to customer increases by Rs.1.18 which ideally should increase by Re. 1, as can be seen from column 3 and 4 above.
- Considering the above ambiguity in valuation for GST, the Government of Kerala has postponed the effective date for levy of KFC from 01 June 2019 to 01 July 2019.
- The said issue in being expected to be addressed in the in the upcoming meeting of GST council and necessary changes are expected to adhere to valuation as enumerated in column 4 above.
Author’s comments
- While the effective date has been postponed, the taxpayers in Kerala should start preparing themselves to comply with the provisions of KFC Rules.
- Filing of additional return i.e. KFC-A will also increase in compliance cost for taxpayers in Kerala.
- GST Council in its upcoming meeting expected to be scheduled in first fort-night of June 2019, should bring in clarity on the valuation mechanism to be adopted.
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I am going to Purchase a Car in Kottayam. On the invoice they mentioned Basic price Plus 14+14% GST and Cess 1% on basic price and Flood Cess 1% on basic price. Is there any 2 Cess charges
is there kfc on products already having cess such as snuff (72% cess) ?
Should KFC tax amount be reported into GSTR1 & GSTR3B ? Although I have already filed KFC-A for the month.
sir
please explain in the case of sales return?
while a party return the goods like sales return,
is cess return to them?
Hi Kushal,
Great job with the article. Hope you could help me out with my doubt.
Assume that the MRP of a product is 100rs and the GST is of 12%, so in this case, the split up will be as follows,
Product value: 89.28
GST: 11.72
Now my question is whether should we calculate cess on the product value separately or should it be fractioned within the MRP as we did for GST.
To be more clear, which of the following calculation is correct?
Case A:
MRP: 100
Product Value: 88.39
GST: 11.72
Cesss: 0.89
Total Receivable Amount: 100
Case B:
MRP: 100
Product Value: 89.28
GST: 11.72
Cess: 0.89
Total Receivable Amount: 100.89
Hi Siddiq
I have the exact question as you had. We are about to go live on a new software and would like to know whether flood cess is part of MRP or can the invoice value go beyond MRP due to application of flood cess? How did you handle it?
Thanks in advance
Sir,
You article was well written. Please clarify after the issue of CBIC Notification 31/2019 dated 28.06.2019, the applicability of Kerala Flood Cess shall be on the base price of Rs.100/= which works out to Re.1/= and the total cost works out to Rs.119/= (Base price:Rs.100, KFC:Re1 and CGST&SGST Rs.18).
Notification No. 312019 – Central Tax
“32A. Value of supply in cases where Kerala Flood Cess is applicable.- The value of supply of goods or services or both on which Kerala Flood Cess is levied under clause 14 of the Kerala Finance Bill, 2019 shall be deemed to be the value determined in terms of section 15 of the Act, but shall not include the said cess.”.
From this above para, it says that GST shall be calculated on the value of supply excluding KFC.
Is this right..?
kindly guide
Still, didn’t get any confirmation regrading the KFC even after the 35th GST council meeting.
Need the clarification on the reversal of KFC on the sales return.
Will it be implemented on 1st July.
Is the date has again postponed from 1st July? And how is the calculation of KFC in Tally ERP.9?
How do we reverse calculate . We have Total Value and not Taxable value . And we need to reverse calculate Taxable Value , Kerala Cess , SGST, CGST . Please advice.
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Well written article..
Very well written article…..