SFC recommends 5% of GST revenue allocation to municipal bodies, including GBA corporations

In a bid to ensure mobilisation of resources for infrastructure development and civic services in urban areas, the Fifth State Finance Commission has recommended that the State government earmark a minimum of 5% of its total GST revenue generated in cities to Urban Local Self Governments, including those coming under Greater Bengaluru Authority.

In its report tabled in the State Legislature on Tuesday, the three-member commission led by former MP Dr. C. Narayanaswamy has observed that the revenue of the municipal bodies would increase by 52% if they get at least 5% share of the State’s GST revenue.

This would help in linking the revenue of the municipal bodies with the State’s economic growth, states the commission.

The commission has indicated that its recommendation stems from estimates that urban areas account for 70% of the State’s total GST revenue.

Interestingly, this is similar to Karnataka’s argument before the Centre that it should get a higher share of GST returns as it is the second highest GST revenue contributor in the country.

Bengaluru revenue

With respect to Bengaluru, the commission has observed that the five city corporations under the Greater Bengaluru Authority make significant contributions to the industries and services sectors, which in turn positively impact State GST. The commission has estimated that the revenue of these five city corporations will increase by over 40 per cent if they get at least 5 per cent share of the assigned GST revenue in their jurisdiction, considering that Bengaluru accounts for 60 per cent of the State’s total GST revenue.

Observing that it has not been possible to get adequate revenue in the form of rents from the properties belonging to the municipal bodies, and the license fee for private advertisement hoardings, the commission has recommended that the State government adopt innovative policies to formulate competitive land lease/rent models like other States. Particularly focusing on rents from municipal properties and the license fee for advertisement hoardings, the commission has said this sector has the potential to yield high revenue.

Taking decentralisation to the next level, the commission has recommended the adoption of ward-wise devolution of funds in city corporations to handle natural disasters and communicable diseases.

Natural disasters

The commission has observed that cities are becoming vulnerable to natural disasters like flooding in low-lying areas during heavy rains and the spread of communicable diseases due to thick population, as the cities are the centres of economic development, and Karnataka is one of the States witnessing fast urbanisation. Hence, measures to prevent the recurrence of such natural disasters and ensuring of funds to back them are important, the commission has stated.