You are using an older browser version. Please use a supported version for the best MSN experience.

Local bodies set to retain some fiscal autonomy under GST

LiveMint logoLiveMint 28-04-2017 Gireesh Chandra Prasad

New Delhi: While all forms of entry taxes levied by local bodies will make way for an all-encompassing goods and services tax (GST) from 1 July, the local bodies, including urban local bodies such as municipal corporations and nagar panchayats as well as gram panchayats, are set to retain their fiscal autonomy over property taxes and user charges.

Local bodies, playing a key role in decentralized planning and development, will be able to leverage these options for any extra fund requirement, revenue secretary Hasmukh Adhia said. They are also free to exempt residents from property tax and other charges.

Fiscal autonomy of local bodies is key for raising resources and to improve service delivery while dealing with the challenges of rapid urbanization. It also enables local administrations to take decisions that may be seen as politically significant.

The East Delhi Municipal Corp. in February decided to exempt those above 70 years from paying property tax and to give a 25% rebate for those aged between 60 to 70 years on one residential property registered in their name.

Property tax remains a significant resource-raising tool for municipal corporations as the number of city dwellers have risen from 22 crores in 1991 to 38 crores in 2011, which also increased the infrastructure spending required at local levels. Urban Indians account for a third of the population and produce more than three-fifths of the country’s gross domestic product (GDP), according to finance ministry data.

Economic Survey 2016-17 pointed out that municipalities that have generated more resources have been able to deliver more basic services and suggested that local bodies should use satellite-based technologies to map urban properties for tax collection, which will help widen their tax base. Available tax base, efficiency in collection and the level of economic activity impact local bodies’ resource mobilization. Local bodies also get funds from the Central government as recommended by the Finance Commission.

GST subsumes all forms of entry taxes into it which enables traders to take credit for these and prevent “tax on tax” on goods.

More From LiveMint

image beaconimage beaconimage beacon