Maharashtra is considering imposition of betterment charge and service tax on developers of residential and commercial complexes adjacent to the mega-infrastructure projects lined up in Mumbai.
Besides, the state government plans to recover premium from builders and developers for the sale of additional floor space index. The proceeds of such levies and charges would be contributed for the creation of a separate Mumbai Development Fund (MDF).
The MDF would be mainly utilised for various infrastructrure projects in the metropolis. At present, the government has launched infrastructure projects of over Rs 60,000 crore (Rs 600 billion) in Mumbai including metro rail, mono rail, upgrading roads and construction of flyovers.
Chief Minister Ashok Chavan told Business Standard, "Due to the implementation of mega projects such as mono rail and metro rail there is an appreciation of property value in the adjoining areas. The government is mulling the possibility of a betterment charge from residential and commercial establishments in those areas."
"Besides, some private projects do need assistance of the BrihanMumbai municipal corporation (BMC), Mumbai Metropolitan Region Development Authority (MMRDA) and other undertakings for infrastructure development and supply of various amenities. The idea is to levy service tax on the beneficiaries. These proposals are at the discussion stage and the final decision will be taken by the state cabinet," he added.
A senior government official, who did not want to be quoted, said imposition of these taxes and charges would be done through an enactment. "The existing BMC Act and MMRDA Act need to be amended to levy these charges. Similar charges are recovered in the US, European countries and Canada. These are known as impact free and development or betterment charge."
The official said that Maharashtra will be the first state to explore these options to mobilise funds for financing infrastructure projects.
Office bearers of the Mumbai's realty sector association, who did want to be identified, said the government needs to explain the concept before taking any final decision. "Its obvious that appreciation of property takes place when a major infrastructure project is launched. But in such a case why should the developer of residential and commercial properties be burdened. In any case, the builder and developer will pass it on to the buyer."
