Lucknow: Legislators cutting across party lines in Uttar Pradesh have demanded that the Vidhayak Nidhi, or constituency development fund, be exempted from the 18% Goods and Services Tax (GST), arguing that the levy reduces the money available for development works in their constituencies.
The demand was raised during the recent Monsoon Session of the Uttar Pradesh Legislature. BJP MLC Devendra Pratap Singh submitted a notice under Rule 138 seeking a unanimous resolution to exempt Vidhayak Nidhi from GST. The Legislative Council was adjourned before the issue could be taken up for discussion.
MLAs seek GST exemption
The demand has also found support among legislators of the Samajwadi Party, Bahujan Samaj Party and Congress. BJP MLA Manish Asija of Firozabad said the government publicises that each MLA receives Rs 5 crore annually, while nearly Rs 90 lakh is deducted as GST, leaving about Rs 4.10 crore for development work.
SP MLA Kamal Akhtar said the government should either quote the amount after GST or increase the Vidhayak Nidhi to Rs 6 crore.
The legislators argue that Vidhayak Nidhi is meant exclusively for public welfare works and does not involve a commercial transaction between an MLA and the government. They therefore see little justification for imposing GST on expenditure incurred on development works.
Government cites GST Council decision
The Uttar Pradesh government, however, has pointed out that the GST Council has already rejected a proposal to exempt Vidhayak Nidhi from the tax. Deputy Chief Minister Keshav Prasad Maurya had prepared the government's response to the demand.
The issue is not confined to Uttar Pradesh. Legislators in Tamil Nadu, Bihar and Uttarakhand have also raised concerns over the GST burden on constituency development funds. Tamil Nadu Chief Minister MK Stalin announced in April 2025 that the state government would bear the 18% GST on the MLA Local Area Development Fund. Tamil Nadu allocates Rs 3 crore annually to each MLA under the scheme.
In Bihar, legislators demanded in February 2026 that the MLA LAD fund be increased from Rs 4 crore to Rs 5-6 crore annually to compensate for the GST deduction. Uttarakhand MLAs have also repeatedly expressed their frustration over the levy.
GST impact on development funds
According to the UP government, GST is not imposed directly on the Vidhayak Nidhi allocation. Instead, it is levied on goods and services procured for carrying out works sanctioned under the fund. GST is generally included in tenders floated for Vidhayak Nidhi works and forms part of the overall cost of the project.
This distinction, however, has not satisfied legislators. Devendra Pratap Singh said the fact that the tax is imposed on goods and services rather than directly on the fund does not alter its impact on the amount available for development.
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Push for renewed discussion
The demand gained further momentum after an 11-member committee headed by UP Assembly Speaker Satish Mahana began consultations with legislators on changes to the implementation of Vidhayak Nidhi. Members across party lines reportedly favoured keeping the constituency development fund outside the GST ambit.
Singh argued that if both Houses of the state legislature pass resolutions supporting the demand, it would strengthen the state's case when it approaches the GST Council again. He said the government should take up the issue with all the facts and arguments instead of treating the Council's earlier rejection as the end of the matter.
