The pandemic has impacted the finances of individuals as well the Governments across the globe. The Governments are resorting to various measures to recover the tax collections. To increase the demand for goods or services across the globe, many countries have reduced their tax rates as it will increase spending power, which means more revenue.
In India, the Government has not reduced the tax rates but has given relief measures to the taxpayers by extending due dates and reducing late fees and interest. The tax rates have been reduced only in the case of goods required for the treatment of COVID. Apart from this, the central bank also increased the Fiscal Responsibility and Budget Management (FRMB) limits so that the State Governments can access more funds and spend.
Pandemic is a natural calamity, and to raise more funds, the Governments are exploring new ways and means. As part of it, the Sikkim state has requested for levy of COVID Cess on the Power Sector and Pharma sector for two years. This Cess is in line with the Kerala Flood Cess levied for two years from 2019. In Kerala, the Cess is applicable on intrastate transactions for B2C supplies, and the taxpayers have to file separate returns. The valuation rules have also been amended to exclude the Kerala Floods cess from the levy of GST wide Notification Number 31/2019 – (Central Tax) dated 28th June 2019.
Basis of the decision taken in the 43rd GST Council Meeting, a Group of Ministers, has been constituted, and they were supposed to submit the recommendations with 15 days. The Group of Ministers constituted are
- Sh. Basavaraj Bommai Minister for Home Affairs, Karnataka Convener
- Sh. Manish Sisodia Deputy Chief Minister, Delhi Member
- Sh. T S Singh Deo Minister for Commercial Taxes, Member
- Sh. K. N. Balagopal Minister for Finance, Kerala
- Sh. Niranjan Pujari Minister for Finance, Odisha
- Sh. B. S. Panth Minister for Tourism & Industries, Member Sikkim
- Sh. Suresh Kumar Khanna, Minister for Finance, Uttar Pradesh
The Group of Minsters will examine the following
- One percent of the turnover of the pharmaceutical sector (excluding the unorganized sector) is imposed for the current year and subsequent two years, up to 2022 &23; and
- Rs. 0.1 per unit of power generated is imposed for the current year and subsequent years, up to 2022-23
If the GoM approves the COVID Cess, we can expect similar measures to be raised by other states. Though the tax rate is very nominal but it requires changes in the following areas
a) IT Systems to capture and collect COVID Cess
b) Accounting Ledgers/Chart of Accounts
c) Return filing systems.
d) various documents being generated like Tax Invoice, Purchase Order, Sales Order etc.,
Moreover, these changes are applicable for a particular state, but there should be flexible to adapt to the localized changes in the era of One Nation One Tax and One Market. Though it is tough not not impossible to adapt to the new requirements in the New Normal.