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BMC to be compensated on the lines of Charged Expenditure

Friday, May 19, 2017
By Prashant Hamine

The reason behind Shiv Sena withdrawing its serious concerns to the passage of the proposed Maharashtra Goods and Services Tax (MGST) Act 2017, better known as State Goods and Services Tax (SGST) Act is in the fine print of the second bill dealing with Compensation to Local Authorities Act concerning with the compensation that will be paid to civic bodies on account of abolition of Entry tax, Luxury tax, Purchase tax, Octroi, Value Added Tax (VAT), Local Bodies Tax (LBT), Entertainment Tax and other such taxes which are collected by Municipal Corporations like the Brihanmumbai Municipal Corporation (BMC).  The  Maharashtra Goods and Services Tax (Compensation to the Local Authorities) Act 2017 provides that 'The compensation amount payable to the Municipal Corporation will be treated akin to a charged expenditure as provided in the Appropriation Bill.'

It may be recalled that the Shiv Sena had raised serious concerns over the passage of the proposed state law on grounds that the Sena-ruled BMC, earned a revenue of about Rs 7,000 crore by way of Octroi. The Sena wanted the state to ensure that the compensation amount shall be assured and paid to the civic body. It may be recalled that Minister for Finance and Planning Sudhir Mungantiwar had rushed to Sena president, Uddhav Thackeray's Matoshree residence in Bandra (East) with the copy of the legislation. Following the government assurance in the fine print, Sena has given its nod to the passage of the SGST bill.

As per the constitutional provisions, a charged expenditure (here it will be treated akin to charged expenditure) is one which does not require a vote in the state legislature or parliament and is applicable on the Consolidated Fund. Here in this law it will be as provided in the Appropriation Bill. Charged expenditure includes salaries of President of India, Governors of states, Speaker and Deputy Speaker, Comptroller and Auditor General of India (CAG), judges of Supreme Court and High Courts.

The state government has convened a special three-day session of both the houses of the state legislature from May 20 to enact the Maharashtra Goods and Services Tax (MGST) Act 2017. Actually the state legislature will pass three bills – the main 116 pages SGST Act, the second bill relates to Compensation to Local Authorities and third bill related to the existing state laws that are to be repealed after the SGST and the Goods and Services Tax (GST) come into effect from July 1. This is for the first time that the state legislature shall sit in session on a Sunday that is May 21.

Sources disclosed that the main SGST bill will first be tabled in the legislative assembly for debate and passage on May 20. On the same day the upper house, the legislative council will debate on the main SGST bill later in the afternoon. Sources in the legislature further disclosed that it shall depend upon the state legislature whether to adopt both the main SGST and Compensation bills together or separately for debate and passage. The passage of the third bill pertaining to abolition of some acts is expected to be a mere formality once the two main bills are passed.

The main SGST bill seeks to confer powers upon the state to levy goods and services tax on supply of goods and services or both, which takes place within the state. It shall empower the state to levy taxes on all intra-state supplies of goods and services or both, except on supply of alcoholic liquor for human consumption at a rate to be notified not exceeding 20 percent.

The third bill that deals with the State Acts that shall be repealed with the passage of the Maharashtra Goods and Services Tax (MGST) Act 2017 includes eight main Acts. These include – Betting Tax Act, 1925, Purchase Tax on Sugarcane Act 1962, Advertisements Tax Act 1967, Forest Development (Tax on sale of Forest Produce by Government or Forest Development Corporation Act 1983, Tax on Luxuries Act 1987, Tax on Entry of Motor Vehicles into Local Areas Act 1987, Tax on Entry of Goods into Local Areas Act 2002 and the Maharashtra Tax on Lotteries Act, 2006.)

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