A Blow To Autonomy?

The landmark Goods and Services Tax, which aims to create a one-tax nation, could reduce local self-governing bodies to mendicancy and lead to centralisation of financial power

- Jitendra

AS STATE governments get ready for the roll out of the Goods and Services Tax (gst), which will subsume all indirect taxes imposed by the Centre, states as well as local bodies, Maharashtra has become the first state to ensure that its urban local bodies (ULBS) do not operate in the red under the “one-nation, one-tax” regime. On May 22, while passing the Maharashtra gst Act, 2017, Ratification Bill, the state government amended it to provide adequate compensation and protection to ULBS as gst kicks in from July 1.

ULBS, such as municipalities and municipal corporations, are local self-governments that provide basic community services like healthcare, water supply, educational institutions, housing, transport and waste management. Though they rely heavily on grants-in-aid from the state government to finance their budgets, they are authorised to collect various taxes, such as those levied on property, entertainment, advertisements through hoardings and billboards, and when articles enter the region (Octroi duty or entry tax). These taxes, howsoever meagre they are, ensure the financial autonomy of ULBS to some extent. A study by the Reserve Bank of India shows that municipalities in the country contribute a mere 0.75 per cent to the gdp, compared to 6 per cent in South Africa. ULBS in states like Maharashtra and Gujarat excel in delivering basic services to urban dwellers because they generate huge revenue and depend less on state grants. The Municipal Corporation of Greater Mumbai earns ₹7,000 crore a year from Octroi duty alone.