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New system: Under the new regime, the quantum of tax will depend on the plinth area of the building and other factors such as the materials used for its construction.

In the first year of the new regime, the basic tax structure for each square metre area of a building in gram panchayat limits will be between Rs. 3 and Rs. 5. These will be between Rs. 6 and Rs. 8 in municipality limits and Rs. 8 and Rs. 12 in Corporation areas.

The guideline issued by the Local Administration Department says the local bodies should limit the increase in tax by between 50 per cent and 60 per cent. It was in 1993 that the building tax was last revised in the State. The tax is now being assessed based on the annual rental value of the building. As there are no strict guidelines for fixing this value, the assessment of tax has led to widespread criticism. The Second Finance Commission had recommended that building-tax assessment be based on the plinth area.

Considering the recommendation, the Kerala Panchayat Raj Act and the Kerala Municipalities Act were amended.

However, the rules were not framed and the tax system could not be updated resulting in heavy losses to the local bodies, says a circular issued by the Local Administration Department.

According to the general guidelines now drawn up for fixing the building tax, the government has decided to consider factors such as the location of the building, nature of its use and construction and the materials used for the construction.

Under the new regime, a basic tax structure will be fixed for a building first. Then, the location, road access, area, materials used for the construction of roof, floor and walls, age of the building and nature of its use will be taken into account. Based on these factors, additions and rebates will be made on the tax.

The guideline issued by the Local Administration Department has classified the buildings as residential, commercial and industrial structures and the tax will vary for each category.

Constructions that do not come under any of these categories will be included under buildings for other purposes. Offices, buildings of educational and health institutions and those of the Union and the State governments and public sector units will come under this category.

For buildings with premium-quality marble, granite, glazed tiles and premium-quality wood flooring, an increase of 15 per cent in the tax structure is likely.

There will be no increase for houses with mosaic, tile, terracotta tile, cement or earthen floors.

For buildings aged 10 to 25 years, a rebate of 10 per cent will be given on the tax. For buildings older than that, the rebate will be 20 per cent.

If the house is used by the owner, there will be no increase.

However, buildings rented out, including pay homes, will attract an increase of 50 per cent. The increase for resorts, star hotels and massage parlours has been pegged at 75 per cent.

The areas that come under the territorial jurisdiction of the civic bodies should be classified as three based on its importance. If the roof, walls and floor of a building is made of different types of materials, the nature of the material that is used to construct more than 50 per cent of the structure should be considered the building material and tax assessed accordingly.

The government has exempted from the increase huts of poor people, houses built with financial aid for those belonging to the Scheduled Castes and Scheduled Tribes and those constructed under the EMS Complete Housing Scheme.

The buildings of banks, computer centres, bunk shops and petrol bunks will come under the category of commercial buildings. Amusement parks and mobile towers will be classified under a separate category.

The Local Administration Department has suggested that the local bodies publicise the tax proposals and seek the views of the public. People will be given 30 days to respond to the proposals. After taking into consideration their views, the proposals will be finalised.

The civic bodies will have to notify the zones in their respective areas and classify the roads that run through their territory.

The taxpayer will have the freedom for self-assessment of tax and submitting the returns. The tax thus fixed by the building owner will be crosschecked by the civic authorities.

Numbering of houses in all 71 wards has almost been completed. The Finance Committee of the Corporation has come up with suggestions and these will be placed before the Corporation Council for approval, Deputy Mayor C.K. Manisankar says.

Mr. Manisankar is not a happy man when it comes to the tax system that has been mooted. He anticipates a fall in the revenue of the Corporation from building tax. The tax on flats will come down and that may have a bearing on the total revenue. The Corporation has taken up the issue with the State Government, Mr. Manisankar says.

Mapping of the city with the help of the Geographic Information System, which has to be completed as part of the introduction of the new tax regime, has not progressed much. “However, we are not waiting for it and have decided to move ahead with the other preparatory works for the introduction of the new system,” he said.

During the financial year 2007-08, the Corporation collected around Rs. 30 crore as building tax. This included the revenue generated as part of the one-time settlement scheme for defaulters.

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