Parl's Standing Committee on Finance calls for GST relief on MPLAD fund

The Members of Parliament Local Area Development Scheme (MPLADS) is “heavily burdened” under GST and the Ministry of Finance should consider waiving it to make the scheme more effective, the Standing Committee on Finance has said in its report.

 

A GST of up to 18 per cent is charged on the work done under the MPLAD scheme.

 

The 31-member panel, led by BJP MP Bhartruhari Mahtab, noted in its report tabled Wednesday that the imposition of GST on these funds reduces their effectiveness.

 

The MPLADS is a central government scheme that enables MPs to recommend development projects in their constituencies to address local needs. Under this scheme, each MP is allocated Rs 5 crore per year, which can be used for infrastructure development, including roads, schools, health facilities, and community assets.

 

“The committee observed that members are facing several issues in the e-Sakshi portal and it needs improvement. The committee also observed that this scheme is heavily burdened under GST. Considering the constant hike in inflation and impact of GST on MPLAD fund, the Committee recommended the ministry to prepare a proposal to take up the matter with Ministry of Finance for waiving off GST from MPLADS to enhance the effectiveness of the scheme,” the report on Demands for Grants (2025-26) said.

 

The panel also flagged serious concerns about the country’s tax administration, urging the government to address the huge backlog of tax arrears and remain sensitive to the honest taxpayers due to erroneous or inflated tax demands.

 

To address this, it recommended “writing off demands” or “imposing moratoriums” on disputed cases to reduce the backlog of demand arrears in a time-bound manner.

 

Another key recommendation was the bifurcation of Personal Income Tax (PIT) data, as the committee noted that nearly Rs 1.5 trillion of business (non-corporate) income is currently misclassified under PIT. It recommended exploring ways and means to segregate the data of PIT as it may not accurately reflect the true picture.  

 

The committee also highlighted the underutilisation of budgetary allocations for FINnet 2.0, a crucial system used by the Financial Intelligence Unit-India (FIU-IND) to detect tax fraud and financial irregularities. It stressed the need for full and optimal utilisation of these funds to strengthen India’s tax enforcement mechanisms.

 

“In regard to Demand No.35, the Committee noting that although the Budgetary Estimate for the Capital Section has increased by 14.5 per cent for 2025-26 as compared to the previous year, there was a shortfall in utilisation during the previous year,” the report added.