The Kerala GST Department issued Circular No. 18/2024, dated October 18, 2024, addresses non-filing of Kerala Flood Cess returns. The Kerala Flood Cess, introduced through the Kerala Finance Act, 2019, was levied from August 1, 2019, to July 31, 2021, on intra-state B2C transactions and specific supplies. However, many taxpayers have not filed KFC-A returns or remitted the cess. The adjudication process for defaulters will follow the Kerala GST and CGST Acts, with notices issued manually, as there is no backend functionality for the cess. Payments must be made via the e-treasury portal, not through GST DRC-03. Proper officers are instructed to follow a detailed guidance note for issuing notices and adjudication.
The Government of Kerala, with the approval of the GST Council, introduced the Kerala flood Cess through the Kerala Finance Act, 2019. This was implemented to address the reconstruction, rehabilitation and compensation needs arising from the massive floods that occurred in the State of Kerala in August 2018. The flood Cess was levied for two years from 1st August 2019 to 31st July 2021 on intra-state Business-to-Consumer (B2C) transactions of goods or services or both. Additionally, supplies between taxpayers registered in Kerala, not in furtherance of business, are also subject to the levy of Kerala Flood Cess. The rate of Kerala Flood Cess is set at 0.25% for the supply of goods subject to SGST of 1.5% and at 1% for the supply of goods or services, or both, attracting SGST of more than 2.5%.
However, it is found that many of the taxpayers liable to remit the Kerala Flood Cess as per Kerala Flood Cess rules has not filed the monthly KFC returns in Form KFC-A or remitted the Cess amount till date.
As per the provisions of Kerala Flood Cess Rules, action against the return defaulters are to be initiated in accordance with the provisions of KSGST Act 2017 as provided under Sub Rule (7) of Rule 3 of Kerala flood Cess Rules, 2019. The relevant portion of the said rule is reproduced below:
The provisions of the Kerala State Goods and Services Tax Act, 2017 (20 of 2017) and Central Goods and Services Tax Act, 2017 (Central Act 12 of 2017), and the rules made thereunder, including those relating to definitions, authorities, assessment, audits, non-levy, non-filing of return, short levy, interest, appeals, recovery of tax, offences and penalties, shall, as far as may be, mutatis mutandis, apply, in relation to the levy and collection of cess leviable under sub-rule (1) of rule 2, as they apply in relation to the levy and collection of tax on the intra-State supplies under the said Act or the rules made thereunder.
Hence, in order to streamline the adjudication process against non-filers of Kerala flood Cess returns and short payment of Kerala flood Cess, the following instructions are issued;
a. In the case of non-filing of Kerala flood Cess returns and/or short payment of Kerala flood cess through the returns filed, the proper officers of taxpayer service vertical shall issue notices to the taxpayers under their jurisdiction and adjudication is to be done in accordance with provisions of the Kerala State Goods and Services Tax Act, 2017 (20 of 2017) and Central Goods and Services Tax Act, 2017 (Central Act 12 of 2017) as stipulated in Sub Rule (7) of Rule 3 of Kerala Flood Cess rules, 2019.
b. As there is no back-end functionality for adjudication process with respect to Kerala Flood Cess, Common portal cannot be used at any stage (for the purpose of issuing intimations, notices or orders) of adjudication and all such process shall be done manually.
c. While issuing communication to the taxpayers, it shall be ensured that all the communications shall contain a computer generated reference number (RFN) as per the instructions in the Circular No 14/2023 dtd 22.7.2023.
d. It shall be mentioned in the Notices that, Kerala Flood Cess payments shall be made through the e-treasury portal as per the method specified in the trade circular 18/2023 and no payments shall be made through GST DRC 03 (through GSTN common portal).
e. Detailed Guidance Note on issuance of notices/ adjudication with regard to Kerala flood Cess is attached as Annexure-1. The proper officers shall comply with the instructions in the Guidance Note while preparing notices and adjudication.
The Instructions can be accessed at: https://a2z-bucket.s3.ap-south-1.amazonaws.com/Kerala_Flood_Cess_%E2%80%93_Non_filing_of_returns_%E2%80%93_Adjudication_instructions_issued_%E2%80%93_reg..pdf