The Standing Committee on Finance on Wednesday recommended that the Ministry of Finance should consider waiving GST on Members of Parliament Local Area Development Scheme (MPLADS) funds to allow for more impactful local development projects. It noted that the imposition of GST on these funds reduces their effectiveness. The MPLADS is a central government scheme that enables Members of Parliament (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 lakh crore 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 underutilization 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 utilization 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% for 2025-26 as compared to the previous year, there was a shortfall in utilization during the previous year,” the report added.
