The Union Finance Minister Nirmala Sitharaman chaired the 55th meeting of the GST Council today (21st December 2024) at Jaisalmer, Rajasthan. The council proposed an amendment in the Central Goods and Service Tax (CGST) Act, 2017 to insert definitions of “Local Fund” and “Municipal Fund”. In order to define the phrases “Local Fund” and “Municipal Fund,” which are used in the aforementioned sentence, an explanation has been added to clause (c) of section 2(69) of the CGST Act, 2017.

Financial resources under the supervision of local self-government organizations, such municipalities or panchayats, are commonly referred to as local funds. The definition would make it clearer what a local fund is and set it apart from other types of government or private funds. Take Your SME to the Next Level with IPO Insights – Click here to Register A Municipal Fund refers to the financial pool maintained by urban local bodies, including city councils or municipal corporations. This fund is used for municipal governance and public services such as waste management, water supply, and infrastructure development. The financial reserve that urban local governments, such as city councils or municipal corporations, maintain is referred to as a municipal fund. Municipal government and public services including garbage management, water supply, and infrastructure development are funded by this budget.

Numerous taxable and non-taxable transactions frequently include local and municipal budgets. Determining GST applicability has become complicated and contentious due to the lack of precise definitions. Take Your SME to the Next Level with IPO Insights – Click here to Register The amendment can guarantee that transactions involving local and municipal funds are taxed effectively, preventing double taxation or improper tax treatment, by giving clear definitions. State governments, urban local governments, and taxpayers will all benefit from clear definitions of their roles under the GST framework. Any ambiguity about the taxability of transactions involving these money will be eliminated. These definitions can aid in the timely settlement of disagreements over the applicability of GST. Transaction Examples Using Municipal and Local Funds. The proposed CGST Act modification will strengthen the basis for efficient tax administration by guaranteeing transparency and equity in the handling of financial transactions involving local and municipal money.