New taxation policy between industries, civic bodies

In a move to end the constant tussle on taxation between industries and civic agencies, including urban and rural local bodies, the government said it will soon introduce a uniform taxation policy.
“We are holding discussions with the urban development and rural development and panchayat raj ministries to finalise rules. It will be tabled before the cabinet for approval soon,” industries minister Jagadish Shettar said before leaving for Davos to participate in the World Economic Forum.

For years now, industries have been accusing local bodies of levying “unreasonable” taxes, which they say is a violation of rules. Industries say local bodies are demanding tax even before industrial layouts are developed by the Karnataka Industrial Area Development Board (KIADB) and handed over to local bodies.
As per rules, layouts, whether residential or industrial, should be handed over to the respective local body, which, besides maintaining it, should provide water, power supply and other infrastructure. “Only after that they [local bodies] are can collect tax,” said a senior official from the industries department.
However, a former mayor of a city municipal corporation in North Karnataka accused the KIADB of “intentionally delaying” handing over layouts after utility services were installed by local bodies. The former mayor said this has allowed industries to function without paying tax.
“If local bodies supply water, electricity and provide other infrastructure, industries are bound to pay tax,” said the former mayor. “But because the KIADB takes it owns sweet time, industries avoid paying tax which is hurting the financial health of local bodies.”
This tussle has led to industries knocking on the doors of courts, resulting in tax dues piling up. Besides this, there is also the issue of different tax slabs being devised by different local bodies — much to the discomfiture of industries.
“The new policy will address all these issues,” Shettar said. “There will be a uniform rate applicable to all urban local bodies.”
Under the new policy, sources say, industries will have to pay tax dues of the previous year from the date of implementation of the new policy. The government will also ask KIADB to share 50% cess it collects from industries with local bodies till it officially hands over the layout.

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