THIRUVANANTHAPURAM: The Centre seems to have won the battle for cooperatives hands down. Budget 2017-18 has made it subtly clear that primary credit cooperative societies (PACS) will not be exempt from the Income-Tax Act, as the state government wishes. From now on cooperative societies will have no choice, but to function like any other bank and abandon non-banking activities like provision stores, marriage halls, construction, rent-a-car and fertiliser retail.
Union finance minister Arun Jaitley said that the plan is to integrate all functional PACS in the country with the core banking system of district cooperative banks, effectively bringing them under RBI control. Finance minister Thomas Isaac can only throw his hands up in despair. “They are trying to take away the functional autonomy of cooperative banks,” Dr Isaac said here on Wednesday.
The move is expected to infuse professionalism in the running of cooperative societies but, on the flip side, primary cooperatives as an easy means of credit will be history. “These banks will be like any other bank, offering institutional credit alone. The human element will be taken out of the transaction,” a top finance department source said. An I-T official said people had the impression that money parked in cooperative societies was exempt from I-T. But the exemption is for societies that serve farmers exclusively and offer loans for agriculture-related activities. The I-T official said that nearly 80 percent of their credit is for non-agricultural purposes, like housing loans, business loans, commercial loans and the like.