I further refer to GOMs No.198 (MA&UD) Dated: 24-11-2020 in which the Levy and Assessment of Property Tax Rules, 2020 were notified.
According to Rule 3(k) of the said Rules, “capital value” is defined as the guideline value of any building including any land occupied by it or vacant land or both fixed by the Stamps and Registration Department for the purpose of Registration.
Further, Rule 4 stipulates that the capital value of lands and buildings fixed by the Stamps and Registration Department for the purpose of the registration as per Andhra Pradesh Revision of Market Value Guidelines Rules, 1998, shall be deemed to be the guideline value for fixation of Property Tax, basing on the following criteria Door Number (or) Digital Door Number (or) Unique Property Identification Number (PTIN);
- ZonesandLocalitiestogetherwiththeirBoundaries;
- Classification of the Building;
- UsageoftheBuilding;
- AgeoftheBuilding; and
- Plinth Area.
In the case of urban agglomerations, the Basic Value guidelines notified by the Registration Department indicate only the uniform capital value for lands in each Block of a Ward, irrespective of the exact location of the land, whether it is adjacent to a road or otherwise, whether it is disadvantageously located with reference to, say, a microwave tower or a high tension line, etc. In other words, the Basic Value is only an indicative rate, not necessarily an accurate assessment of the market value of a given piece of land or a building. In fact, Section 47-A of the Indian Stamp Act as applicable in AP has provided an elaborate procedure, both for the Registrar and the landowner, to question the Basic Value and determine the “market value” on rational considerations. This only shows that the so-called Basic Value has no statutory foundation. This legal position finds confirmation in a judgment dated 24-11-2003 of the Supreme Court in R. Sai Bharathi vs J. Jayalalitha & Ors.
Against the above background, to link the value of land to the Basic Value guidelines of the Registration Department, as done in Rules 3(k) and 4, has introduced an element of arbitrariness, opacity, and denial of natural justice to the landowners. It is therefore legally untenable.
Annual Rental Value Basis (ARV System) to Capital Value (CV) System:
Property tax is a tax leviable annually and, keeping in view the nature of it, the only rational and fair basis for determining the rate of property tax is to link it to the annual returns that a given property will potentially yield, not its imaginary value that the landowner may or may not derive in the rare event of selling the property at a future date. In many fast-expanding cities, in low-income colonies, real estate development would have taken place, spiking the land values notionally, which in itself may not increase the incomes of the low-income families still residing there. Also, even if the Basic Value of land in a given Ward/Block is high, the incomes of some households residing there may not be high, in which case, a low-income household, in the new CV tax regime will be taxed, not on the basis of what the potential annual return on the property is but on the basis of a high notional sale value. In a way, the new tax regime will act unfairly against such low-income households by making the tax unaffordable and eventually forcing the household to make a distressed sale of it to a real estate developer. Therefore, by no stretch of the imagination, one can justify the basis for property tax to be shifted from the present ARV system to the proposed CV system. It violates the letter and the spirit of Article 21 (Right to Life) and also discriminatory across the different income groups. It is an anti-poor proposal.
Repugnant to the idea of self-governance, as envisaged in Part IXA of the Constitution:
Rules 6(6) to 6(9) of the above-cited Rules make it mandatory for the elected body of the municipalities and Corporations to pass resolutions facilitating the proposed shift from AVR to CV. This militates against the idea of the creation of the municipal bodies as self-governing bodies with elected people’s representatives. The legislature of the State cannot direct an elected local body, which in itself is a body owing to its existence to the Constitution, to pass a resolution, possibly against its intention and will, especially in a matter concerning taxation. It brings back the regressive practice of “taxation without representation”!
GVMC:
In the specific case of GVMC, it is unfortunate that the first Resolution of the Corporation for shifting from AVR to CV was passed on 31-1-2021 at a time when there was no elected body and at a time when it was known to the government that elections would be held shortly as per court orders. The fact that a couple of officers in charge of GVMC had passed the resolution behind the backs of the people violated the spirit of democracy that is central to the Indian Constitution. In a way, it subverted the elected body from examining the proposal from the people’s point of view and expressing its views fearlessly and independently.
Even though an elected body came into existence in GVMC, on 3-6-202, instead of taking back the matter to the elected body as required in Rule 6, the Commissioner chose to issue the draft notification directly, calling for objections from the public. This once again made a mockery of the idea of self-governance.
Covid and hasty action on the part of the State government to push through this anti-people taxation system:
The two waves of Covid have literally sapped the citizens of their incomes and crippled their economies. They are struggling to cope with the virus. In many cases, there was the loss of life. At such a time, for the State government to rush through such a regressive change in the taxation system shows how insensitive it is to the feelings and the needs of the people. Those affected by Covid are paying heavily to private hospitals, as the government hospitals have no room. To impose on them a draft notification on taxation, when they are otherwise preoccupied, is to ensure that no worthwhile public consultation can take place and somehow get the regressive CV system imposed on the public in indecent haste.
Many States have announced Covid relief in property tax, in contrast with what the AP government is doing. Among them are next-door Telangana, Maharashtra, Gujarat, etc.
If the State government ignores these concerns of the people and their objections and goes ahead with this regressive proposal, it will certainly lead to avoidable litigation. I am afraid that the proposed shift will not stand judicial scrutiny. Unfortunately, in any such litigation, it is the taxpayers who will once again be forced to bear the cost of the government’s litigation!
I, therefore, appeal to the State government to revoke the regressive proposal forthwith.
(Text of the letter Dr EAS Sarma, former Secretary GOI, has written to Adityanath Das, Chief Secretary, Andhra Pradesh)