Property Tax Controversy

   

Abandoned many times in the recent past, the Jammu and Kashmir administration has started the process of imposing a property tax that is estimated to fetch Rs 150 crore and augment the resources of the urban local bodies. The move triggered a chain reaction, Khalid Bashir Gura reports

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Within days after bulldozers halted the high-pitch anti-encroachment drive, Manoj Sinha-led Jammu and Kashmir administration issued property tax notifications on February 21, 2023, triggering another row. However, this is restricted to urban areas where according to the 2011 census, Jammu and Kashmir’s 27 per cent of population lives. The Housing and Urban Development has notified that it will

assess and collect property tax at five per cent of Taxable Annual Value (TAV) for residential properties and six per cent for commercial properties within the jurisdiction of urban local bodies (ULBs) from April 1, 2023.

Unlike the rest of the country, no property tax was ever imposed in Jammu and Kashmir. There were some efforts between 2010 and 2018 but the stiff opposition frustrated the idea.

Months after reading-down Article 370, the Ministry of Home Affairs (MHA) in October 2020 allowed the UT administration to impose a property tax. Well before it could trigger a crisis, Lt Governor insisted that “there is no proposal to impose the property tax in Jammu and Kashmir”. In June 2021, the Badami Bagh Cantonment Board (BBCB) started levying property tax in areas under its jurisdiction in Srinagar but it was not collected.

Now, when almost all districts across Jammu and Kashmir have started working on the notification, almost everybody from Kanak Mandi in Jammu to Old Town in Baramulla is seeking the withdrawal of the notification. Being seen as “arbitrary and undemocratic and anti-people,” trade, politics and lawyers have all opposed the idea.

Property Tax

All municipal bodies across the world levy a property tax. It is already in vogue in the rest of India. Officials in Jammu and Kashmir expect to raise Rs 150 crore in 2023-24 and pump the funds into moribund municipal bodies currently managed by people who were “elected” to the office by controversial elections. Interestingly, the municipal corporations in Srinagar and Jammu have rejected the idea insisting the proposal was supposed to be mooted from them.

Officials said the tax collections will enhance the resources of urban local bodies, which have not been able to deliver as the revenue from other sources accounted for less than 15 per cent of their operational expenses. The property tax policy will enable urban local bodies (ULB) to get enhanced central devolutions and improve their services.

The tax will be 5-6 per cent of the taxable annual value (TAV) of the properties, a base calculated on basis of nine variables – the type of municipality, built area, land value in line with the J&K Preparation and Revision of Market Value Guidelines Rules, 2011, as on the first day of the block, the number of floors, usage type, construction type, age of the property, given slab of the area, and the occupancy status. It will be in vogue for three years and will be calculated annually with a 1000 sq ft area exempted from the tax.

As per Act, 10 per cent rebate can be availed by early submission of property tax. A person liable to the property tax shall be liable to give to the officer authorised in this behalf particulars of property and tax due by May 30 financial year and the second instalment of tax shall be furnished by November 30 along with proof of receipt of the first instalment.

All places of worship, cremation and burial grounds stand exempted. No tax will be levied on vacant land not attached to a structure or building; or municipal property. The properties owned by the government of India and the J&K government are also exempted. But a service charge at three per cent of the TAV will be payable in respect of such properties.

According to the notification, in case of failure to pay tax, a penalty of Rs 100 or one per cent will be imposed as the maximum amount shall not exceed Rs 1000. “Failure to file return in due time, unless prevented by sufficient cause, will result in a penalty of Rs 100, or 1 per cent of the tax due, whichever is higher, for every month of default, without prejudice to the interest due for the delay in payment,” it reads.

Land Costs

In the evaluation of the land value, the rates that are fixed under the law for particular areas will be fundamental. Many years back, the government felt a serious requirement of having a basic ceiling for the value of the land resource in urban as well as rural areas. Every few years, the top officials in a district sit and evaluate the costs of land on basis of its real market worth for residential as well as commercial purposes. These costs are basic. Once a property is changing hands, the purchaser has to pay the stamp duty strictly as per the minimum prices set by the committee. This process has improved the stamp duty collections.

The growth of revenue in the stamp duty collection has shown a steep hike of 56.12 per cent as the total collection made has reached Rs 425 crore in 2021-22 against Rs 272.22 crore recorded during 2020-21. It is expected to be better by the end of the current fiscal.

These land rates will now be basic to the evaluation of property tax the same way as it has been for the registration of immovable assets for requirements of stamp duty.

Reactions

The decision triggered a row as political parties opposed the move tooth and nail and have demanded its immediate withdrawal. The common refrain across political classes is that it is untimely and its legitimacy in absence of an elected government is a question mark. They justify the opposition to the idea on basis of the economic downturn after 2019, owing to various factors including Covid19, political instability, inflation, and unemployment.

NC and Congress, now vehemently opposing the move, initiated the bills for the imposition of property tax in 2010 and managed its passage in the erstwhile assembly. A subsequent bill for setting up the property tax board was cleared in 2013. However, the process was binned as the government feared the move will have serious fallout on the electoral prospects in the 2014 Lok Sabha and assembly polls.

“No taxation without representation, why should people in J&K pay state taxes, including the proposed property tax, when we have no say in how our government is run and no say in the decision-making of J&K?” Omar Abdullah, in whose era the bills were initiated, said in a tweet. “We are expected to be mute spectators to all unjust decisions by Raj Bhavan.”

NC’s Jammu president, Ratan Lal Gupta terms the tax as Jaziaand insists the peoples’ paying capacity has dipped to an all-time low. He sees it as the move to “impoverish” and make “lives miserable”. He said for allaying the distress of the people, there should be elections and decisions on property tax will be taken by representatives of the people.

Jammu and Kashmir is without an elected government since 2018 summer – almost 56 months.

Congress president Vikar Rasool sees the tax as an “injustice” for people who are battling high rates of inflation, unemployment and low business due to government policies. It is like an emergency, he added.

“The people of Jammu and Kashmir are being oppressed and are distressed economically and politically. There is terrorism in J&K unlike in the rest of the country.  There should be elections and such decisions should be left to elected governments,” Congress spokesperson Ravinder Sharma said. “

It is like a dictatorship procedure. Taxation is not new to Kashmiris as we have been paying taxes in different shapes since Maharajas times. But this time the economy is derailed and the orders come from the top which renders ULBs useless,” added GA Mir, former JKPCC president.

Former Chief Minister, Mehbooba Mufti said the tax was part of the BJP’s larger agenda of impoverishing the people of Jammu and Kashmir.

“These tactics are to keep people of Jammu and Kashmir under never-ending stress and trauma so that they can’t focus towards their genuine demands,” PDP spokesperson Mohit Bhan said. “Imposition of local taxes is the prerogative elected representatives of Municipal Corporation or Panchayats and such arbitrary orders prove the administration has no regard for any institution and they just want to bulldoze everything which comes in their way.” Bhan said the government orders are like earthquakes and floods.

People’s Conference president Sajad Gani Lone alleged the government of perpetrating economic euthanasia. “Property tax in aftermath of -an year lost post-2019, a couple of years lost in Covid is – seems determination to turn every stone that can be turned to ensure economic euthanasia. Governments have pumped billions worldwide to bump start ailing economies,” Lone tweeted. His party colleague Basharat Bukhari regretted that while in the rest of the world, governments are offering packages and creating employment opportunities post-pandemic, it is completely vice versa in Jammu and Kashmir.

Apni Party said the “unprecedented and big decision” should not be taken by LG administration and should ideally be left to an elected government.

“This is a return gift by the BJP to the people, who voted for them,” Harsh Dev, who returned to his Panthers Party said. “It has imposed so many taxes in the past like GST and created inflation in the country as the security situation is adverse, the unemployment in J&K is the highest in the country, and the economy is in shambles.”

Terming the decision as “arbitrary and undemocratic,” CPI (M) leader Mohammad Yousuf Tarigami said levying property tax in the absence of an elected government is quite unconstitutional.  “Whatever elected formations exist on the ground, they have to decide. Why are they depriving these ULBs of their own legitimate rights of decision-making? The process of collecting tax and deciding the values of the tax is the sole prerogative of these institutions. How does an officer in Raj Bhavan know the terrain in Habba Kadal,” Tarigami said as he demanded elections in the UT if according to government claims, all is well.

The newly formed Democratic Azad Party (DAP) also voiced its concern about taxation and questioned the timing. There is a need to understand that for the past three decades, the people in Jammu and Kashmir have suffered in every aspect due to militancy, Azad said. This has triggered unemployment and weakened the economic condition. “I can only say that the time is not apt for the move because of the economic conditions of the people here,” he said.

BJP state spokesman Altaf Thakur said that tax is being paid in every city of India. “In J&K it was in vogue during 1962 and 1982 when these regimes were ruling who are vehemently opposing it. However, we are also requesting LG to defer its imposition as the UT has been going through a bad phase due to militancy for the last three decades which weakened UT’s economy,” he said as it is not the right time.

Bar Associations

The political class apart, other sections of society reacted to the development as well. There were protests in certain towns. Normally, the lawyers were the first to come to the streets. The reaction was vocal in Jammu, unlike Kashmir.

Jammu and Kashmir High Court Bar Association’s outgoing president MK Bhardwaj asked the administration to withdraw the notification.

Terming it “tax terrorism”, the president asked the administration to stop pursuing “anti-people” policies in Jammu and Kashmir. “Jammu and Kashmir can’t be equated with other UTs or states in the matter of taxations, especially when no facilities of the like are available here,” he said urging the government to raise the economic status of people first. The bar association at Jammu suspended work for a day. “We have an anti-encroachment drive where the people in possession of land for over decades together are deprived of their land,” they said.

Trade followed the lawyers. Newly appointed Kashmir Chamber of Commerce and Industry President, Javid Ahmad Tenga said, the trade body is assessing property tax. However, he said it is not the right time to impose it as people’s financial conditions are not good.  Jagmohan Singh Raina, who is also part of the KCCI body said, as central laws are being applied to J&K, the process is being carried out without local consensus.

“We have for long being governed by bureaucrats,” Shakeel Qalander, a former FCIK president said. “They don’t consider the reality on the ground while formulating policies. Even though this property tax is being imposed everywhere, we are an exception as we had to unlike others grapple with turbulences for decades as well natural disasters like floods and pandemic.”

Unlike Kashmir, the Chamber of Commerce and Industry Jammu was vocal. “Chamber is of the firm opinion that this order of imposition of property tax should be withdrawn by the government to give a sigh of relief to the people of Jammu and Kashmir”, Chamber President Arun Gupta said. “If the government fails to understand our feeling than we shall have no other option but to go for a bandh call by consulting civil societies, bar association and others”.

Last year, Gupta said the idea of imposing the tax was mooted but the Chamber opposed it and the idea was shelved.

Miffed Mayors

Srinagar’s Mayor, Junaid Azim Mattoo said that the decision was not approved by elected ULBs and thus the SMC will explore ways to contest this ‘arbitrary move’.

“Imposition of Property Tax in J&K is ironically violative of municipal empowerment as this has neither been deliberated upon, nor approved by elected ULBs. While SMC will explore ways to contest this arbitrary move, I am writing to the Hon’ble LG seeking a withdrawal of the SO,” Mattoo tweeted

Similarly, his deputy, Parvaiz Ahmad Qadri urged people not to panic over property tax. “People need to understand that the proposal has to be first passed by the Srinagar Municipal Corporation. We are rejecting it even before its arrival. It won’t get the consent of corporators. People should not panic,” he tweeted.

Qadri said the tax was not implemented since 2000 despite being a law in vogue. “Why do we need to take money from people? If the UT had been developed then we may have asked for taxes but even the basic amenities like sanitation, drainage, and street lights are not even working,” he rued.

Asked that the tax collections are supposed to add to the ULB resources, the deputy mayor said that there is no dearth of funds but bureaucrats lead the resources lapse. “Last year, only 30 per cent of funds could be utilized in the city and the rest lapsed. The files in which we had proposed plans gathered dust till March. They give approval at the eleventh hour when we have no time to meet a deadline,” he claimed.

Unlike his counterparts in Srinagar, the mayor in the winter capital termed it as a reformative move.

Jammu Mayor, Rajinder Sharma said that it has been imposed across the country except for Jammu and Kashmir and local body institutions need their revenue generation resources. “Our grants are linked to this resource. If we do not get property tax, the centre will not fund us liberally. The Centre has funded crores of rupees to each ward, unlike the past. We must now get independent,” Sharma said.  “The Property Tax has been imposed by the Administrative Council of the Union Territory and not by the JMC. In a democratic set-up, the Administrative Council has superseded us and they have the power to do so.”

Progressive Taxations

In response to the widespread reaction, Jammu and Kashmir Housing and Urban Development Secretary, H Rajesh Prasad talked to the media in Jammu. He indicated the expected Rs 150 crore collection will improve municipal services. He said the residents were imposed the least tax slabs if compared to the rest of the country.

“Better municipal services are expected to attract more investment and encourage more people to set up businesses in Jammu and Kashmir. Revenue generated from Property Tax will be used to improve infrastructure, build new parks and playgrounds and maintain the already existing facilities which will significantly enhance the services provided by municipal bodies,” Prasad said.

Prasad said that tax rates are notified in such a way that its implications are progressive in nature with minimum implication to small businesses and households as according to him, it is to be levied annually and can be paid in two equal instalments, it will not be burdening common citizens.

A day after issuing the notification, the government said the tax rates were one of the lowest in the country – almost half that of Himachal Pradesh, and one-fourth to one-sixth, overall, of other states such as Gujarat, Maharashtra, Karnataka, and Delhi.

The tax rates are 25 per cent lower in the municipal councils and 50 per cent in municipalities. “Residential property with built-up area up to 1500sftare also discounted ensuring relief from Lower Income Group and Middle Income Group category residential houses. Similarly, small commercial establishments especially shops up to the size of 100sqft and 200sqft are also provided relief with very minimal tax implications,” the spokesman said.

The debate is on. Deputy Commissioners have started the process of implementation of the notification. Some Deputy Commissioners said most of the towns in their jurisdiction will be impacted by the new tax to less than half indicating that Srinagar and Jammu cities will be the major source for Property Tax collections. LG Sinha also reacted. His last statement on the issue was a question: “In Jammu and Kashmir, people pay to use internet data, buy I-phones and play videos; I wonder why there is a hue and cry over the imposition of property tax?”

Post Script

Lt Governor Manoj Sinha spoke on the issue of property tax after fierce reaction against the idea from political class and the business in Jammu and Kashmir.

“This is the lowest property tax rates that are being imposed,” Sinha told reporters on the side-lines of a function at SKICC on February 27, 2023. “It is almost one-tenth of what is in vogue in Shimla, Dehradun and other places.”

Offering statistics, Sinha said there are 5,20,000 residential structures in Jammu and Kashmir’s urban space. Of them, 206000 have a built-up area of 1000 sq ft which are already exempted. In 203600 residential structures which are built above 1000 sq ft but below 1500 sq ft will have to pay Rs 1000 a year. Of these 203600 houses, he said in almost 80 per cent of the structures, the owners will be paying no more than Rs 600 a year.

Sinha said there are 101000 shops across Jammu and Kashmir and 46 per cent of them fall under a 100 sq ft area and will have a minimum of Rs 700 a year. There are only 30000 shops which are spread over less than 2000 sq ft. These will be paying Rs 2000 a year.

“Nearly 75 to 80 percent of the population of JK will be exempted from the Property Tax. Those who are falling under the purview of Property Tax are trying to create chaos and confusion among the common masses”, the Lieutenant Governor reiterated on March 2.

Sinha said the citizens across the country are paying Property Tax. Property Tax proposed for Jammu and Kashmir is one-tenth of Shimla-the capital of neighbouring Himachal Pradesh”, he said and pointed out that on an average Rs 900 to Rs 1000 to be paid annually as Property Tax.

LG said that aim of proposing this tax is to develop the cities of Jammu and Kashmir. “Every year government grants funds worth Rs 900 crores to the urban local bodies of JK. Property Tax will be directly deposited to the concerned urban local bodies for the overall growth and development of the area,” he added.

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