Bihar granting taxation powers to gram panchayats from next fiscal

Officials said the tax rate for each category, where panchayats can collect tax was being finalised.

The gram panchayats in the three-tier rural local bodies system will soon have the power to impose tax for collection of own revenue in Bihar, a move aimed to achieve financial independence for local self government institutions. The state government is giving the final shape to rules for taxation powers to panchayats under the Bihar Panchayati Raj Act, 2006.

In Bihar, there are a total of 8,386 gram panchayats, which are headed by Mukhiyas.

The gram panchayat, which forms the bottom level of the three-tier rural local bodies, will have the powers to collect taxes from markets, haats (small temporary markets at the village level), commercial use of vehicles in respective gram panchayats such as tractors and trucks and also commercial use of water for any purpose. Besides, tax could be collected by the gram panchayats from transmission towers set up by private and public sector operators, officials said on condition of anonymity.

In Bihar, there are a total of 8,386 gram panchayats, which are headed by Mukhiyas. “We are going to give the powers of imposing tax to all gram panchayats for generating their own resources. The rules are being framed and sent to the cabinet for approval. The panchayats would implement the new tax rules from next year after the constitution of new panchayat bodies following elections to the local rural bodies,” said additional chief secretary, panchayati raj department Amrit Lal Meena.

The panchayati raj department minister Samrat Choudhary too, informed the state assembly on Wednesday that the rules for giving taxation powers to gram panchayats were under process and will be implemented from the next fiscal year. The government may take a call on giving taxation powers to panchayats samitis and district boards later on, officials said.

The issue of taxation powers to the gram panchayats and other rural local bodies has long been pending with successive state finance commissions recommending the same to reduce the rural local bodies’ dependency on grants from the state and Central governments.

The fifth state finance commission, for the period 2015-20, in its report, had recommended that state government should put in place rules and procedure in place for collection of property tax by the gram panchayats and also encourage panchayats to develop infrastructure like bus stands, community centres and markets to increase their own revenue. The 14th finance commission also recommended taxation powers to panchayats.

Under the Bihar panchayati raj law, gram panchayats have the powers to realize tax and non-tax revenue from holdings, trade, professions, employment as well registration of vehicles not registered under any other law, sanitary arrangements at haats, pilgrimage spots, fairs and public use, water rate, lighting fee etc.

Officials said the tax rate for each category, where panchayats can collect tax was being finalised. “The tax rate for different categories would be in various slabs and there would be an upper limit fixed for each slab. The rates are being finalised,” said Meena.

Right now, the gram panchayats are dependent on grants and devolutions from the central and state government. Each gram panchayat gets around ₹2 crore as grant and other allocations for implementation of various development works and schemes from the Centre and the state government.

Meanwhile, officials said the state government’s implementation of the public financial management system (PFMS) has fixed more accountability on the PRIs-related financial accounting and expenditure as all tied and untied funds allocated to the panchayats have to reflect in the software. Some panchayat representatives have recently expressed annoyance over procedural delay in using development funds. “The use of PFMS has brought in more financial accountability and transparency. There were some delays but efforts are being made to smoothen the processes,” said additional chief secretary, Meena.