A 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 is required to raise funds for calamities.

“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 in New Delhi.

The panel has decided to seek states’ views on whether a state-specific or a nationwide ‘disaster tax’ should be levied under the GST.

Bihar Deputy Chief Minister Sushil Modi, who heads the seven-member group of ministers (GoM), said the panel would also seek comments from the Attorney General on the legality of levying a ‘disaster cess’ or a ‘disaster tax’ to help states hit by natural calamities.

“The GoM has decided that the GST Council will prepare a questionnaire and send to states for response… Out of the terms of reference of the GoM, the council will draft 15-20 questions. For example, whether it (cess/tax) will be state specific or it should be levied throughout the country,” Modi told reporters.

Also, the discussion with states would be around what will be the mechanism of creation of the fund and disbursement in cases when it was decided to levy cess or tax specific to the state hit by a calamity or it would be a nationwide tax.

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 said that in the last 4-5 years, the kitty of National Calamity Contingent Duty (NCCD) has been declining and especially after the GST.

“The mechanism of funding states is not sufficient in case of natural calamities… Already there is a section in the constitution amendment bill itself which says GST Council shall make recommendations to the union and the states on any special rates or rate for a specified period to raise resources at the time of natural disaster,” he said.

The NCCD collection has come down from Rs 6,450 crore in 2016-17 to Rs 3,660 crore in 2017-18.

The NCCD is a major contributor to the National Disaster Response Fund (NDRF), and since the duty collection is coming down hence the additional requirement of funds from NDRF is being provided from the central budget.

The NDRF is managed by the central government to meet relief and rehabilitation expenses of states hit by natural disasters.

The GoM would also discuss the feasibility of levying a disaster cess or tax with the 15th Finance Commission whose mandate includes studying the impact of GST on state revenues.

Apart from Modi, other members of the panel are Kerala Finance Minister Thomas Isaac, Punjab Finance Minister Manpreet Singh Badal, Odisha Finance Minister Sashi Bhusan Behera, Assam Finance Minister Himanta Biswa Sarma, Maharashtra Finance and Excise Minister Sudhir Murgantiwar and Uttarakhand Finance Minister Prakash Pant.

(With inputs from agencies)