The Information Kerala Mission (IKM), which executes e-governance projects in local bodies, has demanded a share of the property tax being collected by the local self-governments in the state. As per the demand, IKM needs 5 per cent of the total property tax collected by local bodies in a financial year. The total demand for 2024-25 in terms of property tax was ₹2,836 crore. Local bodies will have to shell out ₹141 crore, if the demand of IKM is met at a rate of 5 per cent.

The new demand for the property tax share has created a rift within the local self-government department (LSG). Officials point out that if this demand is met, it would undermine the fiscal autonomy of local bodies and also impact the functioning of certain panchayats, which are under financial stress. Recently, the state government considered another demand from IKM to take a 1 per cent collection charge of the construction workers' welfare fund cess,which used to be collected by the local bodies.

Cess and tax collection are done through the K-SMART module developed by the IKM. It had pointed out that a huge amount is required to meet the expenses required for messaging services, file operations, server maintenance, training, operation and maintenance and hence the collection charge, which goes to local bodies, shall be collected by the IKM. The government considered this demand and allowed the IKM to levy 1% collection charge for the payment of construction cess.

IKM also receives digital costs for transactions related to various certificates. In addition, the corporations, municipalities and gram panchayats give 0.25 per cent of the development grant to IKM, while 0.1 per cent of the grant is given by block panchayats and district panchayats. In the state budget for 2025-26, IKM was allotted ₹9 crore and the first instalment of ₹3 crore was released in May.

It is learnt that the Director of Urban Affairs has objected to the demand and noted that it would impact the tax revenue of local bodies and would have a cascading effect on developmental initiatives. LSG Minister M B Rajesh said that no decision has been taken on the percentage of tax to be given to IKM. "The local bodies have defaulted on payments that are due to IKM. The dues come around ₹100 crore. If this proposal is implemented, all other payments by local bodies to IKM will be stopped. A high-level team is looking into the proposal. We need a fund flow to run IKM," Rajesh told Onmanorama.

Adeela Abdulla, Special Secretary II, LSGD, said that the government is considering the merit of the proposal. It has been cited that while property tax is paid as per provisions of the Kerala Municipality Act and Kerala Panchayati Raj Act, any move to allocate a portion of this tax to an autonomous body of the LSG should be done by proper legislation. IKM implements the KSMART project in Kerala through which e-governance solutions are executed in local bodies across the state.