Local bodies in Kerala will have to give 2.5 per cent of the property tax being collected under each account to the Information Kerala Mission (IKM), which executes e-governance projects in local self-government institutions in the state.

The LSGD Special Secretary Adeela Abdulla has issued the order overruling objections raised by the Director of Urban Affairs. The decision to allocate a share of property tax to the IKM was based on a demand raised by the IKM. 

The original demand was for 5 per cent share of each transaction. As the objection was raised by the LSGD, the state government formed a committee in August to study the demand. The committee, headed by the Special Secretary, LSGD, had the Principal Director, Urban director, Controller of administration, IKM and Panchayat director as the members.

The committee noted that with the deployment of the K-SMART module, the collection of property tax in local bodies has increased, and the efficiency of collection has been enhanced. The local bodies were hence directed to transfer 2.5 per cent of each transaction to the IKM. 

With the order coming into effect, 2.5 per cent of each transaction in local bodies under the head of property tax will be auto-debited and credited to the account of the IKM. IKM stands to gain ₹70 crore annually with this new move. IKM officials had pointed out that the present income sources are inadequate for the digitisation processes and daily expenditure of the IKM. 

The annual property tax demand of local bodies for the fiscal year 2024-25 was ₹2,836 crore. When the IKM raised the demand for a share of property tax, it was cited that the move 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 impose a 1 per cent collection charge on the construction workers' welfare fund cess, which was previously collected by 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 per cent collection charge for the payment of construction cess.