The second council meeting of the recently elected Greater Visakhapatnam Municipal Corporation (GVMC) held on June 23 saw much chaos, with corporators from opposition parties staging protests and walkouts until a debate over the issue of the imminent property tax reform and the hike was allowed. The reforms, which could lead to a rise in property tax by up to 15%, have been opposed by the Left parties in the state, as well as the Telugu Desam Party (TDP). At a time when most people are suffering financially due to the pandemic, opposition parties have argued that the property tax reforms will add to the burden, especially for small business owners whose shop rents would go up. Combined with the newly introduced ‘garbage tax’ and hike in charges for other civic amenities, the reforms will heighten the financial stress, members of the opposition have said. Moreover, Left parties in the state have criticised the state government for taking decisions related to local bodies without allowing for debate, in order to qualify for additional borrowing from the Union government.
Earlier in November 2020, a Government Order (GO) was passed by the state Municipal Administration and Urban Development Department, changing the rules for levy and assessment of property tax. The system for levying property tax was changed from an Annual Rental Value Basis (ARV) System to Capital Value (CV) System, by making amendments to five Municipal Acts through an ordinance. This move was part of the Urban Local Bodies (ULBs) reforms, one of the reforms stipulated by the Union Ministry of Finance, for states to qualify for additional borrowing rights.These reforms involve a hike in property tax and user charges for water, sewerage and drainage, with the aim of increasing the revenue of ULBs. As of January, three other states apart from Andhra Pradesh (Madhya Pradesh, Telangana and Manipur) had undertaken these ULB reforms.
According to the new property tax system in Andhra Pradesh, property tax levied on residential buildings would be between 0.10% and 0.50% of the Capital Value (CV), and for non-residential buildings, it would be 0.20% to 2.00% of the Capital Value (CV). The order specifies that the new tax calculated in the CV system cannot exceed the existing tax (based on ARV) by more than 15%, and this cap will apply to annual tax hikes in succeeding years.
Responding to criticism that the YSRCP government was placing a financial burden on people for additional borrowing rights, Municipal Administration and Urban Development Minister Botsa Satyanarayana claimed that the new system was decided in a scientific manner by officials who visited states like Maharashtra and Karnataka to study their tax systems, and that it would remove the interference of middlemen and promote transparency in tax assessments. Stressing that there’s an upper limit of 15% on the property tax hike from existing rates (as per 2002 notified rates), he argued that the new system would result in additional revenue of “just Rs 186 crore” for the state.
Babu Rao, Convenor of Andhra Pradesh Urban Citizens Forum (APUCF) which has been protesting the reforms in ULBs, said that in spite of the cap of 15%, the new system is a burden on small traders and other urban residents. “The pandemic has had a lasting financial impact on most of us. At a time when the government should be providing tax relief, they’re imposing additional burdens instead,” he said. While there is a cap of 15%, the property tax can now increase on a yearly basis, while it was earlier required to be revised once in five years, CPI(M) corporator in GVMC, B Ganga Rao noted, adding that in five years, the tax could easily be doubled if it were to be increased annually.
The TDP has also objected to the new system, saying that with many small businesses suffering due to the pandemic and lockdowns, a rise in shop rents, along with the ‘garbage tax’ and other charges, will worsen the situation. ULBs across the state are also in the process of implementing user charges for waste collection and processing from households and commercial establishments, as per the Solid Waste Management Rules, 2016, which is mandatory for ULBs to qualify for Finance Commission grants from 2021-22.
Water charges and sewerage user charges have also been hiked through orders issued in November, in order to “enable the ULBs to realize the O&M (operation and maintenance) cost in full from the users.” Babu Rao also noted that waste management charges are already a part of the property taxes and shouldn’t be collected in addition.
In the lead up to the municipal elections to ULBs held in March, in which the YSRCP saw a massive victory, the issue of property tax reforms and other civic amenities charges were discussed at the time of campaigning. At the time of campaigning, several YSRCP leaders, including Endowments Minister and Vijayawada West MLA Vellampalli Srinivas, refuted the criticism over these issues as false propaganda and claimed that there would be no hike in property taxes. On June 23, at the GVMC’s second council meeting, the proposal to levy user charges for waste collection was passed through voting, amid heavy objections from opposition parties, as the YSRCP enjoys a majority of 63 in the 98-member council.
After protests by the opposition parties, a discussion on the property tax reforms was allowed, where GVMC CPI(M) corporator B Ganga Rao argued that the decision-making power of ULBs was being weakened by the state and Union governments. Earlier on June 3, a draft notification regarding the new property tax system was issued by the GVMC, inviting public opinion on the exact percentage of taxation to be levied. Based on objections received over a month, the corporation will pass a final resolution fixing the percentage of property tax on capital value. This resolution is likely to be passed at an upcoming council meeting likely to be held after July 15, according to Ganga Rao.
Draft notifications have been similarly issued in several municipalities, by the Municipal Commissioners on the council’s behalf, in the absence of an elected council prior to the elections. However, in many municipalities including Vizag and Vijayawada, the draft notification was similarly issued without running it through the council even after the ULB elections, said Babu Rao. He also alleged that in several municipalities, YSRCP corporators who initially opposed the taxes in favour of public opinion eventually weakened their stance to align with their party leadership.
Even the BJP and Jana Sena Party have protested the property tax hike and garbage tax, demanding that the GVMC’s draft notification be revoked. The Municipal Administration Minister in response criticised the Union government for the rise in petrol prices and stated that the measures were in line with the Union government’s recommendations.
While public opinion on the GVMC’s draft notification will be gathered till July 4, this is only regarding the percentage of property tax on capital value, and doesn’t allow objections to the capital value system itself, Babu Rao argued. The Municipal Administration Minister claimed that the government was willing to conduct public debates on the issue in cities like Visakhapatnam, Vijayawada and Tirupati, to alleviate people’s fears, once the COVID-19 situation was under control.
Although the new property tax system was to be implemented from April 2021, it was delayed due to the pandemic, and the final resolution is yet to be passed in most ULBs. The APUCF (Andhra Pradesh Urban Citizens Forum) and CPI(M) have called for statewide agitations across municipalities on June 30 and July 1, demanding that the new tax systems be revoked. The TDP has also said that it is likely to hold statewide protests if the matter remains unresolved.
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