Kerala GST Department releases Adjudication Instructions for Non-Filing of Returns and Short Payment of Kerala Flood Cess

The Kerala Goods and Services Tax (GST) Department has released detailed instructions and guidelines for handling non-compliance, non-filing of returns and underpayment of the Kerala Flood Cess (KFC).

The Kerala Flood Cess, established under the Kerala Finance Act of 2019, was implemented in response to the devastating floods of August 2018 to fund the state’s restoration and rehabilitation operations. The cess was charged on intra-state B2C transactions and some non-business supplies from August 1, 2019, to July 31, 2021.

Considering the levy, the GST Department discovered many taxpayers either failed to file the required monthly KFC returns (Form KFC-A) or did not pay the correct amount of cess. To simplify the process of penalizing and adjudicating such situations, the government has issued specific guidelines for tax officers.

Important directives include issuing show-cause notices (SCN) to defaulters and proceeding with adjudication under the Kerala State GST Act, 2017. The adjudication process will be done manually because the common portal cannot be used for Kerala Flood Cess-related cases.

Officers are advised to include a computer-generated reference number (RFN) in all correspondence and to make cess payments through the state’s e-treasury portal rather than the GST common portal.

When taxpayers fail to reply or comply, show-cause notices will be issued under Section 74(1), outlining the cess, interest, and penalties owed. The Kerala GST Department has also stated that interest will be charged at 18% per year on overdue bills, with penalties ranging from 15% to 50% depending on the date of payment.

If no payment is made within 30 days after receiving notice, a more strict adjudication process will begin, which may include the issue of an Order in Original and Recovery proceedings.

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