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Maharashtra: Higher property tax for IT companies in gram panchayat areas

PUNE: The state rural development department has directed the authorities to levy property tax at industrial rates on information technology (IT) companies in gram panchayat-controlled areas.

In a letter dated November 15, 2019, addressed to the Pune zilla parishad CEO, the department said IT and IT-enabled services (ITeS) companies falling under the jurisdiction of gram panchayats must be taxed at the rates that are levied on other industries in their respective areas.
“Normal residential tax rates will not be collected from (such companies),” the letter read.

In doing this, the department has rejected a proposal by IT industry associations to set the tax at residential rates, as is the practice for companies in municipal corporation limits.

Considering that industrial property tax rates are up to three times more than residential rates, it remains to be seen how companies — in an already strained industry — manage this additional cost.

IT industry representatives said that the proposal was rejected in a unilateral manner and without any discussion.

“We have been pursuing this for three-four years with the state government. Our contention was that if the tax rates are low, the state will be an attractive destination of IT companies to set up shop,” Vidhyadhar Purandare, secretary of Software Exporters Association of Pune, said.

He said the move will result in a higher outgo (expenditure) for companies situated in gram panchayat limits, in places like Hinjewadi, Maan and Marunje.

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There are close to 1,200-1,400 small and big IT units scattered across the city, and the logic of demanding residential rates, according to industry players, is that many of them are in the startup phase and operate out of home. Another issue is that the industry is not in a particularly great shape now and is being buffeted by global headwinds. The new tax rates threaten to hike the property tax rates paid by these companies by 2-3 times, a source said.

Meanwhile, many IT industries in Hinjewadi argue that they do not get anything in return for paying such high taxes to the gram panchayat.

“They (the gram panchayat) do not do anything for us. In fact, when we propose some development, the panchayat even objects to it. In Hinjewadi, we have to grapple with primitive issues like garbage burning by the roadside, bad roads, encroachments, etc. I don’t know where all our tax money is going,” a senior executive of an IT industry said.

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