Which taxes can be imposed by Nagar Nigam?

Taxation has been one of the major source of revenue for states across the world for centuries and India is no exception to this equation. Every nation has a structured tax system that consist of both progressive and proportional taxation based on income and other factors. Rate, Slabs, Exemptions, etc. are determined by the central and the state government. The money received by the government is known as tax revenue and it is utilized for a wide domain of purposes such as infrastructure development in the form of roads, railways, bridges, dams, etc., public healthcare and education, defense, etc.

What is Nagar Nigam?

The 74th Amendment Act of the Indian Constitution established Municipal Corporations, or Nagar Nigams, to efficiently manage urban areas. These elected bodies handle civic affairs, including sanitation, water supply, fire protection, road maintenance, and amenities like parks. Each ward elects a representative for a five-year term, ensuring diverse representation. The Mayor, elected by the people, heads the Nagar Nigam, supported by a standing committee and a Municipal Commissioner, usually an IAS officer. Reserved seats cater to scheduled castes, tribes, disadvantaged classes, and women. This decentralized urban administration aims to enhance the quality of life in cities.

Why is there a need to charge tax by Nagar Nigam?

The health of Nagar Nigam is a critical element of effective urban governance, which will determine whether India realizes her economic and developmental promises. Nagar Nigams have faced growing fiscal deficits, constraints in tax base expansion, and weakening of institutional mechanisms which enable resource mobilization remain challenges to these Nagar Nigams.

Nagar Nigams have a very wide range of area which comes under there jurisdiction, and being administering a city or urban area the demand of infrastructure and public expenditure is much higher. Residents expect the urban bodies to develop a better infrastructure in terms of better roads, better traffic management, better sanitation, better heath infrastructure, etc. But all this comes with its cost, and these urban bodies are required to levy taxes to receive revenue in order to increase public expenditure.

Example of taxes charged by Nagar Nigam includes: Property tax, house tax, sewerage tax, water supply tax, parking fees, toll tax, entertainment tax, advertisement tax, etc.

Different taxes which are charged by the Nagar Nigam

Property Tax

Property tax is one of the most substantial source of revenue for local government bodies. Property tax is charged on the ownership of property at city-level. ‘Property’ here in includes all tangible assets which are registered under the ownership of any individual. It is a wide term, which includes all properties ranging from self-owned residential spaces and extends to commercial premises rented out to third parties. Owner of real estate are required to pay annual charges to the government, local bodies are authorized by the government to collect tax on behalf of them. Owners have the option to pay tax either annually or semi-annually. Also, this tax varies from each location, city and state as per the prescribed laws and regulations.

Property Tax = Base value x Type of building x Age factor x Floor factor x Category of use x Built-up area

Toll Tax

Toll tax is type of a fees which a user is required to pay while using a vehicle as a mode of transportation using certain roads mainly national highways, expressways, and state highways. Toll tax is required to be charged as a handsome amount of investment and resources are required to maintain efficient roads which could result in faster and safer mode of transportation using these roads, charging toll tax help the authority to cover the costs of construction, maintenance, and regular operation required to manage these roads and highways. Authorities use toll plazas to collect toll fees, mainly private companies are given the contract to collect toll tax, they charge commission for this collection and disburse the amount to the authorities. Local authorities mainly charge commercial vehicles, and they exempt private and local vehicles from any charge of tax.

Entertainment Tax

Entertainment tax is also referred to as amusement tax, Entertainment tax is a tax charged by the government on entertainment industry. This tax is levied on various forms of entertainment, such as movies, theatre, dance, music, sports, gaming, etc. The rate of entertainment tax is different from state to state. The government imposes entertainment tax and uses the collect revenue for the entertainment sector’s general development and other cultural development. State government also has the authority to issue exemptions for any event as well. Entertainment tax collection is disbursed to the state government but the enforcement and collection is managed by local authorities. In the year 2022-23 government managed to collect more than 3300 crore from levying entertainment tax.

Water supply Tax

This is the fees which is charged by local water supply authorities for providing water supply to households and businesses. Most of the time the authority is given to PHED water department, and the have the authority to manage water connection, install new connection and discontinue existing water connections. Local authorities charge typically on the basis on the water consumption based on metered connection or a fixed rate for unmetered connection. Local authorities also charge businesses for the commercial connection of water supply, as they use huge volume of water for irrigation, or other manufacturing process. Levying water supply tax helps the authorities to cover the costs of water treatment, distribution, and maintenance of establishing water supply infrastructure.

Sewerage Charges

Sewerage charge is levied by municipal authorities for the maintenance and operation for sewage treatment and establishing sewerage treatment infrastructure in the city. Charging sewerage charges from citizens help the local authority to cover the costs which are associated with collection, transportation, and treatment of wastewater. These charges on most instances are included in water bills and is collected by PHED water department. Sewerage charges vary from case to case, as this depends upon the location, type of connection either personal or commercial and type of property. Sewerage charges is important to ensure a clean and healthy environment and ensuring proper sanitization facility for citizens.

License Fees

Local authorities have to undertake several administration works as well, under their ambit also comes the task of granting permissions and tenders. Under a good governed framework the trade and businesses all are monitored and regulated by government and the same is delegated to local bodies. There are several businesses which required proper licensing in order to commence business operations, and it is require by the law to intimate government and obtain permission to commence the operations. Local authorities charge fees which is called as licensing fees in order to obtain any license. For example in order to start a business within a state, or within the jurisdiction of a municipality, trade license registration will be required from the concerned authority to commence with any business in a particular area or location which comes under the jurisdiction of the municipality or Nagar Nigam.

Parking Fees

This is a very common form of charges or tax which is implemented by the local authorities. As we are aware that the cities are becoming very crowdy and traffic management is a concern for authorities in populous cities and town, in order to manage proper traffic management and to ensure that citizens do not park there vehicles on unwanted places, such wrong parking could lead to traffic congestion and which will impact the citizens in the end. Local authorities provides parking spaces for citizens so that they can manage the traffic on busy roads and areas, they charge a nominal fees to ensure that unwanted vehicles and traffic congestion might get cleared out and only those vehicles shall be parked who are in need of space near any market or crowded places.

Conclusion

Local authorities are a very important pillar in the governance structure, there role directly impacts the lives of citizens. Local authorities are loaded with several task which very from basic facility of providing water and extents till construction of roads, and important infrastructure. Revenue is the ultimate requirement for any government division to work and function properly. As per the legislature of the state, the local authorities are directed to charge and levy several tax on the citizens. Taxes like Property Tax, Urban development Tax, Toll Tax, Entertainment Tax, Water Tax, Sewerage Tax, Education Cess, Advertisement Tax, etc. are charged by them.

FAQs

Why do local authorities levy tax?

Taxation has been one of the major source of revenue to local authorities, it is required to levy taxes as local authorities have to manage the roads, healthcare, sanitation, traffic monitoring, etc. and managing all these tasks is also important as it effects the day to day lives of citizens.

What are the most common taxes which are charged by local authorities

The most common taxes which are charged by local authorities are Property Tax, Urban development Tax, Toll Tax, Entertainment Tax, Water Tax, Sewerage Tax, Education Cess, Advertisement Tax, etc.

Who allows local authorities to levy tax?

As per the 7th Schedule of Indian Constitution, the subjects under which union and state government might charge tax, and as per the state legislature the powers are conferred to the local authorities by the state government to collect and manage taxes on behalf of the state government.

What is a property tax?

Property tax is one of the most substantial source of revenue for local government bodies. Property tax is charged on the ownership of property at city-level. ‘Property’ here in includes all tangible assets which are registered under the ownership of any individual. Property tax varies from each location, city and state as per the prescribed laws and regulations.

Who heads a Nagar Nigam or Municipality?

The head of Municipal Corporation is called as Mayor, he is directly elected by the citizens through an election which is conducted by State Election Commission.

What is Trade License?

A trade license is a document or certificate that allows the applicant to commence a particular trade or business in a specific area or location. The holder of the trade license cannot use it for any other work or business. The applicant is required to take permission from the local authority or municipality to start the business operation.