The Goods and Services Tax (GST) bill might have sailed through in the Rajya Sabha, but the BJP might run into a roadblock of a different kind put up by its ally, the Shiv Sena.
Once the GST is imposed, no local body tax can be levied on movement of goods within a city or town. Most importantly for the Sena, the Brihanmumbai Municipal Corporation (BMC) will be robbed off its single biggest source of income, the octroi levy.
Urban local bodies will have to depend on the State governments for a share of the taxes they collect.
These provisions are cause for worry for the Sena, which runs the civic bodies in Mumbai, Thane, and Kalyan-Dombivli. It has also emerged as a major player in the civic bodies of Pune, Nashik and Navi Mumbai.
Which is why, Sena leaders insist, there might be friction between the two allies over the GST bill the state government will soon start drafting.
In the assembly, Sena MLA Sunil Prabhu raised the issue, asking chief minister Devendra Fadnavis to clarify his stand. Fadnavis, in his response, said that the government will ensure that the BMC doesn’t lose its financial autonomy.
“We will have to create a new bill at the state’s level to regulate the sharing of funds. In this bill, we will create institutional mechanisms to ensure that the flow of funds remains constant and doesn’t change with governments,” he said.
However, the Sena is not entirely convinced. In political circles, the battle over controlling the BMC is a prestigious one, especially because its Rs37,000-crore budget is larger than that of many small states.
The Sena is worried that the GST might be used as a tool to break the BMC’s financial independence. “If this happens, we can foresee a situation where the state government will do its best to cripple the financial autonomy of the BMC and make it dependent on the State’s grants. If the government is allowed to control the flow of funds to cities, it won’t be too long if the flow is dictated by politics,” said a Shiv Sena MP, not wishing to be named.
Little wonder, then, that Sena’s Rajya Sabha MPs, Anil Desai and Sanjay Raut, both insisted, in their speeches during the bill’s passage on Wednesday, that cities must get funds directly from the Centre and not depend on the state governments.
Former chief minister Prithviraj Chavan agreed that the finances of civic bodies are likely to be impacted. “These civic bodies will have to be dependent on the state government for their finances. This is not an ideal situation but, overall, the GST is a positive development,” he said.