Property tax too high, say Delhi traders

Local traders in Delhi have strongly opposed the unit area method used to calculate the property tax, employed by the Municipal Corporation of Delhi (MCD).

They feel the method will result in huge losses for commercial and industrial units, as compared with the norms of the tax prevalent earlier.

At a convention organised by the Confederation of All India Traders and the Federation of Delhi Small Industries Association, the traders were apprehensive that the property tax was 25"�30 times higher than the earlier tax, and would lead to the closure of a large number of units.

However, Aakash Taneja, special officer (unit area method), Delhi government, says the full potential of the property tax has not been utilised anywhere in the country.

Its base is considerably eroded by administrative and procedural inadequacies. Problems relate to the setting of the tax base and tax rate, tax assessment, tax collection, tax exemptions, and dispute resolutions.

The new system of assessment is based on the total covered area of the property, the unit area value per square metre (UAV), and other factors based on objective parameters. Unit Area Value is calculated based on colony category, type of structure, the age of the construction, use of property, and the occupancy factor.

Also, the Delhi Property Tax Action Committee, having a representation of more than 200 trade and industry bodies, feels the industrial and commercial estates in the capital lack infrastructural facilities, and says the colonies have been classified in an illogical way for the purpose of the tax.

It wants the industrial properties to be classified in a lower category so that the burden of the property tax is manageable.

According to the committee, the corporation is charging 1.5 times the tax on annual rateable value on industrial and commercial value, as compared to residential properties. The traders said that the higher rate of the property tax in respect of rented premises was an unnecessary burden on the owners.

For non-residential use, the property tax in residential colonies is also on the higher side.

Small industrial and commercial activity is undertaken in the residences to supplement family income, traders say.

The main thrust of the new system is that it places the onus of payment of the tax on the citizen, much like the income tax. It provides for a "hardship and anomaly committee" to meet grievances.

The government claims it is stable and will be revised every three years, based on the recommendations of the municipal valuation committee, as per the amended provisions of the Act.

The share of the property tax varies in the range of 40"�80 per cent of municipal income. This tax is an indirect user charge.

The government feels it suffers from a lack of adequacy, buoyancy and acceptability. The property tax accounted for as much as 73 per cent of the total tax revenue for the MCD during 2002-03.