The Group of Ministers (GoM) formed by the GST Council on Monday agreed that funding from the national and state disaster response funds -- NDRF and SDRF -- are not sufficient in case of disasters and a new mechanism to raise funds is required.
"We had a preliminary discussion and the members felt SDRF and NDRF are not sufficient to compensate the states in case of natural calamities and disasters," GoM Convener and Bihar Finance Minister Sushil Kumar Modi said after the group's first meeting here.
The seven-member GoM, including members from North East, hill and coastal states, was set up on September 28 by the Goods and Services Tax (GST) Council after Kerala, ravaged by floods, demanded approval to raise additional cess over GST to meet the financial needs.
Kerala has demanded that they should be allowed to raise 10 per cent cess on their SGST (state GST).
The GoM will examine the modalities for revenue mobilisation based on six terms of reference in case of natural calamities and disasters. The GoM, which will meet again in November, will evaluate all possibilities and present its recommendations to the GST Council.
Modi, who chaired the meeting of Finance Ministers from four states -- Punjab, Kerala, Odisha and Bihar, said the GoM will draft a questionnaire based on the terms of reference and will send it to all the states asking for their response on a set of 15-20 questions.
"The questionnaire will be sent to the states asking whether this calamity tax should be state specific or should it be a Union tax and whether it should be levied on all the commodities or should it be on specific commodities, as NDRF and SDRF fund is not adequate," he said.
Further, the GoM will have to decide the right mechanism both in case states are allowed to raise tax rates or levy cess at their individual level or if a pan-India rate hike or additional cess is considered in case of calamities. Also, whether it will be in the form of a permanent fund in case of a Union tax and who will manage that fund and what will be the disbursal norms.
"We will take the opinion of Attorney General and will also discuss the issues with the Finance Commission before deciding on the way forward," he added.
On NDRF, he said the funding has been going down for the last 4-5 years as major part of the National Calamity Contingent Duty (NCCD), the duty for NDRF, has been subsumed in the GST.
"In 2016-17, this duty was Rs 6,450 crore and the last year (2017-18) it came down to Rs 3,660 crore, as a major part of this duty was subsumed in GST. The maximum fund of Rs 12,452 crore released under NDRF was in the year 2015-16 but the duty part was only Rs 5,690 crore and the rest amount was provided by the Central budget.
(With inputs from agencies.)