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Proposed cess on property tax will cost you dear
August, 20th 2011

Sunil Shinde, who is in the process of buying a 1,300-square-foot flat for Rs 2 crore, will have to shell out Rs 16 lakh towards stamp duty, registration fee and VAT- - which works out to 8% of the property's value.

But Shinde is worried that other than this one-time payment, he might have to fork out well over Rs 25,000 every month towards BMC taxes and society fees. TOI on Friday reported that chief minister Prithviraj Chavan has piloted a proposal to impose a 0.5% special cess on the general component of property tax. Pressure is now mounting on Chavan to scrap the move.

Shinde is worried that even a monthly income of Rs 2 lakh cannot guarantee a comfortable property buying and owning experience in the city.

The proposed 0.5% cess on property tax could well be the last straw for home owners in the city.

While buying a flat, one has to pay stamp duty, registration fee, VAT, service charge and service tax; and once a flat is purchased, the owner has to pay at least seven types of taxes. "We have to pay general tax, street tax, tree cess, education cess, employment guarantee cess... I have two flats, so I have to pay wealth tax on the second flat. In return, what do I get? Roads full of potholes, erratic water supply and poor civic services," said Sunil Shinde, who is in the process of buying a 1,300-square-foot flat for Rs 2 crore.

The cess has been proposed to fund the establishment of the Maharashtra Municipal Property Tax Board (MMPTB).

"Chief minister Prithviraj Chavan will have to take a decision since the proposal will come into force after the urban development department, headed by the CM, issues a notification for the purpose," a senior bureaucrat told TOI on Friday.

The CM, though, has come in for criticism from not just property owners and activists , but even politicans. Senior Congress leader Anant Gadgil has requested Chavan to reconsider the proposal in the interest of the common man. "The aam aadmi is already burdened by spiralling prices. A middle-class Mumbaikar pays a huge amount to the BMC by way of several taxes. The new cess will only add to the burden." An architect, Gadgil said that instead of imposing fresh taxes, the civic organization should launch a tax-recovery drive, improve resource mobilization and tap such resources, which will not have an adverse impact on the common man. "In a city like Mumbai, the BMC has a scope to mobilize resources ," Gadgil said.

Social activist Prakash Gangadhare said that Chavan should "immediately stay" the proposal for the cause of the common man. "We will meet Chavan to press for our demand. At a juncture when the life of the common man has become miserable, additional cess on property tax will create a fresh financial crisis for him."

Another flat buyer, Milind Sharma, too strongly criticized the urban development department's proposal. "On one hand, Chavan has been holding forth on low-cost and affordable housing and, on the other hand, by imposing fresh taxes, the basic purpose of constructing low-cost houses would be defeated," he said. The state-run Maharashtra Housing and Area Development Authority (Mhada), he said, charges a fee if a flat faces the road or has a better view. "I have been told that Mhada has been levying additional fees for flats overlooking an arterial road or a highway," said Sharma.

After the finance commission declined to release Rs 1,100 crore to the state government due to its failure to set up the MMPTB, a bill for the board was passed during the state legislature's budget session. It was later approved by governor K Sankaranarayanan . The bill provides for imposing a cess of 0.5% on the property tax's general component to meet the board's expenditure.

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