For the investors, property development isn't just regarding availability of land or the cost of construction, but also taxes — the cost of payments to be made to the government before proceeding with projects. In this context, the revised building taxes structure, framed by the Kerala Government in 2007, which is being implemented from April this year, hasn't gone down well with the building owners in the State.
The revised package, now in place, incorporates new provisions and parameters for calculating the basic tax rates. For one, the tax will be levied on the total floor area of the building, and the rate will be worked out per square metre. Also, the rates will vary, depending on the activities for which the buildings are used, and consequently, they have been segregated mainly into housing, industrial and commercial categories, for the purpose. Even the materials used for parts of construction will be taken into account while fixing the rates.
BUILDING OWNERS' VIEW
The Kerala Building Owners Association has termed the new tax regime as being unjust and unscientific, and blind to the ground realities of the sector. To begin with, the criterion of plinth area is devoid of any reasoning, and the tax should be levied only on the basis of carpet area, giving exemption to spaces such as staircases, toilets and car parking, says the association. Similarly, houses with a carpet area of up to 50 square feet should be taken out of the tax net, instead the prescribed 30 square feet, as of now.
Under the new dispensation, the location of the buildings has been divided into three zones for variable taxation, and the association feels the provision is inadequate. To add credence to the measure, there should be at least 10 zones based on the importance of the area, road connectivity, and access to the buildings. And the government should evolve arrangements to inform the public of the new format.
The association is also against fixing tax rates on the basis of the purpose for which the buildings are used. It says that while renting out the building, the owners cannot legally prescribe conditions on the use of the building, and hence the provision should be withdrawn.
The tax rates are also linked to the materials used for flooring, roofing and on the walls. But, in present times, use of glazed tiles and some other materials has become so common, that the higher rates in this respect are uncalled for, and scrapped from the list.
CLASSIFICATION
Another anomaly, according to the association, in the government order on revised tax norms, is that godowns have been classified along with hotels, restaurants and shops, though the rentals for godowns are lower than those for some other facilities. Also, tax reliefs haven't been extended to buildings used by government-recognised educational institutions. The ‘vacancy remission' allowed by the corporations to rental buildings lying unoccupied has not been made binding on the panchayats as well.
The association says that the new tax structure is not at all conducive for development of properties, especially at a time when the demand for housing and commercial spaces is on the rise in the State.
The Government should initiate steps on an urgent basis, to look into the issues, and effect the necessary amendments to the tax clauses, it adds.