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The Rajya Sabha’s Select Committee on the Goods and Services Tax (GST) Bill is likely to put forward some suggestions to protect the income of panchayats and other local governments prior to the implementation of the new tax regime.
The Panchayati Raj Ministry has also raised concerns over certain proposals in the panel’s meeting held recently.
There is near unanimity in the panel that the rights of local bodies should be protected. Its members have suggested amendments to Clause 17 and Clause 19 of the Constitutional Amendment Bill.
During a discussion with the officials of the ministry in May, the members had pointed out that though the Bill provides protection for the panchayat’s right to levy Entertainment Tax, there is none for their right to collect Advertisement Tax, Entry Tax, etc. The members argue that all taxes, duties, levies, royalties and tolls currently levied by panchayats should remain with them.
The Mumbai Municipal Corporation, fearing loss of octroi income after GST implementation, has demanded that local bodies be compensated.
Also, there is no consensus within the panel on issues such as excluding tobacco from the GST’s ambit. The Congress is demanding that tobacco, tobacco products, alcohol and electricity should be under the GST regime, which is similar to the Central Government’s argument. However, on the issue of taxes levied by panchayats, most members seem to be supporting the arguments of the Panchayati Raj Ministry.
A note circulated by the Ministry to the members said there should be “absolute clarity” on the protection of local taxes levied by panchayats, which varies across the country in quantum and buoyancy. “There should also be clarity on the possible future authorisation to levy, collect and appropriate taxes by panchayats, as decided by State government under Article 243 H of the Constitution,” the Ministry said, citing Constitutional provisions and recommendations of 13{+t}{+h} Finance Commission.
The Ministry said the State Finance Commissions could recommend how GST can be shared with local governments. It also recommended that local governments be compensated when GST is implemented.
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