The State Government is expected to announce a slew of reliefs in property taxes of industrial units by responding to an old and contentious issue that bothered investors for long due to a lack of clarity and structure.
“We have found that their concerns are genuine. We are working with the Urban Development department, and the Cabinet will soon take a decision on this,” Industries Minister Jagadish Shettar told ET.
Investors and senior executives at the helm of industrial units located at the industrial suburbs developed by the Karnataka Industrial Areas Development Board (KIADB) have been complaining to the government that the local bodies have been demanding exorbitant property taxes every year. Local bodies (municipalities and panchayats) assess and collect taxes from industries in their jurisdiction.
The problem with their assessment is they classify a property as either residential or non-residential. “The local bodies don’t have a separate classification for industries like electricity supply companies have. A non-residential property by default means commercial, according to local bodies, and therefore, industrial units end up attracting the highest rate of property tax,” Shettar said.
In the case of electricity bills, commercial consumers attract the highest tariff while industrial units pay a lower tariff. The government is working on similar lines of introducing a separate tax rate for industries. The Minister, however, said the Cabinet will take a view on whether to make the proposed relief prospective, or retrospective.
Shettar said he has come across instances where some industries have simply defaulted on payment of property taxes after they found them to be steep. The Cabinet may also consider introducing a one-time-settlement scheme on dues in property taxes, he said.
In many instances, industrial estates developed by the KIADB are years away from real development, and hence, have not been handed over to local bodies. While panchayats collect taxes, KIADB is tasked with development and maintenance of the estates, an official said. There is, however, this very rare example of Peenya Industrial Area in Bengaluru which has completely been taken over by the BBMP. It not only collects the property taxes but also maintains the suburb.
“We need some more reforms in the area of taxation of properties in industrial estates. In many places, industrial units end up paying taxes to the local panchayat, and a maintenance fee to the KIADB. But both entities pay little or no attention on the upkeep of the industrial areas,” said KV Rajendra Hegde, President of Bidadi Industries Association. In our own Bidadi industrial area, he added, two village panchayats have been collecting property taxes for decades now, but have not spent a single rupee in the 1500-acre estate or installed a street light.
In industrial areas such as Jigani on the outskirts of Bengaluru, industrial units pay a fee to the local Association, a maintenance fee to the KIADB, and property taxes to the local panchayat. They find it quite burdensome, Hegde said. A recent amendment to the Panchayat Raj Act has sought to end the confusion in the calculation of taxes for industries by linking it to the portion of built-up area and vacant land, and providing an option to industries to pay online through the KIADB.
