Property tax exemption won’t ease burden, say experts

Advocate Shreeprasad Parab

While the state government has exempted flat owners with less than 500 sq ft carpet area from paying property tax in Mumbai city and suburbs, it's recent decision to impose a hefty non-agricultural (NA) tax on all residential outlets, irrespective of the flat's size, has been criticised by experts.

Since December last year, the government of Maharashtra began sending NA tax demand notices to residents in some parts of Mumbai, Navi Mumbai, Thane and Pune. This was based on legislations that the state had passed, permitting it to charge NA tax on residents with retrospective effect from 2006. Apart from residential flats, NA tax is being levied on commercial and industrial outlets across the state.

Cooperative housing federations have already filed a PIL in the Bombay High Court, claiming that the NA tax is "arbitrary and unconstitutional". The PIL will be heard on April 4. Speaking with mid-day, Advocate Shreeprasad Parab, and expert director at the Maharashtra State Cooperative Housing Federation Limited, who is representing the petitioners in the PIL, said, "We must understand that once agricultural land usage is converted for non-agriculture purpose, there is no way that the land usage will be converted again for agricultural purpose. This is our main concern. It should be abolished by the state."

Parab said the decision to exempt flats admeasuring carpet area of less than 500 sq ft from paying property tax, is nothing but an eyewash. Any development comprises two major components, i.e. the land and the construction on it. "Thus, for development of property in urban areas, the budget comprises the land cost and the cost for construction activities. Any person buying a flat in any real estate project has to pay the developer the cost of the land, cost for construction, infrastructure development cost, stamp duty and registration charges, a premium to authorities for FSI, purchase of TDR, development cess, charges for various NOCs, premium for open space deficiency, development charges, conversion tax, and property tax," Parab said. By imposing a huge demand notice for NA tax, the government is now burning a huge hole in buyers' pockets.

The protest against the NA tax is spreading far and wide, with several state federations and organisations also separately filing a PIL through Parab in the Bombay High Court to examine the validity of the demand notice of NA tax issued by the state government.

Chartered Accountant Ramesh Prabhu, secretary of Mumbai Suburban District Cooperative Housing Federation, said, "The revenue department is already charging conversion charges for converting agricultural land to non-agricultural land for developing residential, commercial and industrial set-up in metro cities. Once agricultural land gets changed to cement and mortar structure, property tax is levied. How can the government continue to charge NA tax on such structures, and that too retrospectively?" Prabhu asked.

When asked about the next course of action, Prabhu said, "We are in the process of finalising a separate PIL before the Bombay High Court and would join the main PIL filed in the matter already, which is coming up for hearing on April 4."

Despite HC ruling, Navi Mumbai not spared either

Three decades ago a similar NA tax was levied by CIDCO in Navi Mumbai. The issue was challenged by the HC, which observed that CIDCO did not have any authority to levy such a tax. The NA tax is once again being levied in Navi Mumbai. BR Mhatre, general secretary of the Navi Mumbai Federation, said they are opposing the same and have demanded abolishing it in a fresh PIL.