West Bengal to introduce unitary tax system

In a move which is expected to bring down cost of rented properties in the state and thereby boost service sector industries like IT, ITeS and retail, West Bengal is going to introduce unitary based tax system by next financial year by scrapping the archaic model of rent based property tax.

The new system, already in practice in cities like Delhi, Mumbai and Bangalore is also expected to simplify procedure, improve compliance and increase property tax revenue collection.

Members of builder fraternity today met the state urban development minister Ashok Bhattacharya who assured that a bill pertaining to reform in municipal tax regime would be brought to the Assembly soon.

"We are hopeful that unitary method will be introduced in all municipalities, including Kolkata Municipal Corporation (KMC), in the state from April 1, 2005. It will be useful not only for the developers as well as for buyers," Pradip Chopra, secretary, Confederation of Real Estate Developers Association of India (CREDAI) informed.

The most important feature of unitary method is that it is based on self-compliance based on certain parameters - size of the property, area, zones, age of the building - laid down by the municipalities.

The method is expected to make rented property cheaper as the tax on rent collected would not be more than Rs 5 per square feet. Today, in KMC area, municipal tax is 45 per cent of the rent for a commercial property and 30 per cent of the rent for residential property. It forced builders to create maze of agreements to bypass the tax net.

For properties that are not on rent, the tax computed on the basis of notional rent.

Builders expressed hope that the unitary method would also bring down litigation to a large extent. It will also reduce corruption by minimising inspector raj.

Now the challenge before the state and municipalities to create different parameters and introduce tax slab accordingly.

For instance, Kolkata would be divided into different tax zones based on real estate price index.

Thus properties between Park Street and Jodhpur Park would attract higher rate of tax than those in congested central and north Kolkata. Residents of new buildings would also have to pay higher rate of taxes than the residents of old buildings.