In a recent development, UP exempted DMRC and NCRTC from municipal taxes, resolving a dispute with Ghaziabad Municipal Corporation over INR 56 crore in accrued taxes. While GMC argued for service charges on government installations, DMRC cited a 2014 MoU with GDA for tax exemption. This decision contrasts with outstanding taxes owed by 19 central and 18 state government buildings, totaling over INR 135 crore. The exemption raises broader questions about tax equity and compliance among government institutions, highlighting the complexities of municipal finance and fiscal governance.
Uttar Pradesh issued an order exempting the Delhi Metro Rail Corporation (DMRC) and the National Capital Region Transport Corporation (NCRTC) from municipal taxes on February 19. This decision followed a dispute between the Ghaziabad Municipal Corporation (GMC) and DMRC over INR 56 crore in unpaid taxes for municipal services provided at eight metro stations along the Blue and Red Lines. An official from GMC clarified that their request emphasised a nationwide central government regulation mandating municipalities to levy service charges on central and state government buildings and installations.
This regulation extends beyond services provided within office premises, encompassing areas like roads, water, sewerage, and street lighting. However, DMRC invoked clauses from a 2014 memorandum of understanding (MoU) with the Ghaziabad Development Authority (GDA), asserting exemption from tax liabilities. On the other hand, GDA clarified that it was responsible for state taxes only until the completion of infrastructure construction for the Red and Blue Lines. Subsequently, upon the commencement of DMRC services, tax payments became due, amounting to INR 56 crore.
GMC oversees sanitation services and maintains sewerage and water networks at eight metro stations on the Blue and Red Lines, for which it levies service taxes on central or state government installations. GMC was in the process of assessing taxes for NCRTC as rapid rail operations commenced recently. Eventually, the matter reached the state government, leading to a decision by the principal secretary to exempt DMRC and NCRTC from municipal taxes.
It is noteworthy that while DMRC and NCRTC received tax exemptions, other central and state government institutions did not. Presently, there are 19 central government and 18 state government buildings and installations, with a combined outstanding service tax amounting to over INR 135 crore. GMC has struggled for years to recover these outstanding amounts from these institutions, resulting in significant financial strain for the corporation.
In conclusion, the recent exemption of DMRC and NCRTC from municipal taxes sheds light on ongoing debates surrounding tax obligations for government entities. While this decision addresses specific concerns, it also shows broader challenges in tax compliance among central and state government institutions. As municipalities seek to balance fiscal responsibilities and service provision, such exemptions raise questions about equity and accountability within the tax system.
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