Through transparency, innovative approaches and progressive policy the task can be achieved, says industry body ASSOCHAM
“Maharashtra alone accounts for over 20% of both stamp duty/registration fees and overall taxes on property transactions as the state has largely streamlined compliance and tax administration in this area, thereby curbing evasion,” says a study titled ‘Trade Policy & Tax Regime: State Level Initiatives’ conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
Similarly, collections on account of stamp duty and registration fees on property and capital transactions across India could be more than doubled and be raised to about Rs two lakh crore through an innovative approach, progressive policy and greater transparency together with streamlining the system for convenience of masses, the study said.
Other smaller states, viz., Delhi, Kerala, Haryana and Punjab too maintain robust collections on this account, which is reflective of the real estate industry in the respective states, highlighted the ASSOCHAM study while suggesting that Maharashtra’s pattern should be studied by other states and adopted with necessary modifications.
“With property prices skyrocketing in most metropolis and price of agricultural land too rising sharply in recent past, a progressive policy in this regard is the need of the hour,” said D.S. Rawat, secretary general of ASSOCHAM.
“The stamp duty and registration fees on property and capital transactions form a major component in the states’ revenue basket,” said Rawat. “In India, where property transactions are often regarded as shady and undervalued to avoid payments vis-à-vis stamp duty and registration fees, an innovative approach to this aspect would result in much larger collection, besides tackling parallel economy to an extent.”
“As stamp duty and registration fees collections show strong growth, state governments should do away with land revenue and property tax or factor this at the time of sale or purchase and make it a one-time payment,” suggested the study. “While local bodies can be compensated for the loss of revenue on this account, it could save the stress and trouble for village and urban poor who own a small piece of land.”
Stamp duty and registration fees have much wider ramifications in so far as streamlining and management of a very important segment of the economy, highlighted the report.
Taxes on property and capital transactions cover two important aspects viz., stamp duty and registration fees, besides land revenue and tax on urban immovable property tax. Thus, this segment covers a very huge financial sector which determines the flow of savings, housing, land and property holding.
“Hence a very close look at various aspects of this item of revenue will ensure a greater transparency in the economy and also a steady inflow of revenue to the exchequer,” said the study. “This will also result in monitoring and administratively gathering vital data on land and property holdings both in urban and rural areas.”
ASSOCHAM has also emphasized about a pressing need for taking an all-inclusive view of the entire fiscal policies and tax structure to pep up domestic demand and make India’s exports more competitive. “Creation of an efficient and cost effective production base within the country would lead to a gradual rise in demand from internal and external markets.”
“Desperate times call for desperate measures, more so as India is facing one of the worst economic phase due to the recent rapid rupee devaluation together with the burgeoning current account deficit (CAD) threatening the country’s ability to meet foreign currency payment obligations, multitude of taxes and sluggish pace of reforms are also key reasons why Indian economy is tottering,” said Rawat. “There is a need to develop a national level single market by removing all existing trade barriers, multiplicity of acts, fiscal policies and marketing arrangements across India.”
According to the study, a customer friendly and responsive service environment should be created across the country for consumer, trade and industry demand to flourish. It is possible to marginally raise the motor and commercial vehicle tax and abolish the passenger and goods tax. “With the increasing number of vehicles produced and used in India, there is a compelling need to make road traffic smooth and free from bottlenecks and this will go a long way in easing the traffic and undue harassment to transporters and passengers as local bodies could be compensated by the state governments for loss of revenue in this regard.”
ASSOCHAM has also suggested that policy makers should focus on increasing efficiency of tax collections with a customer friendly approach as increasing volume of goods and services are being produced and traded in the country. “Money will flow into government coffers if the policy initiatives focus on ‘tax collection with human face’.”
By taxing diesel, petrol and other petroleum products (including cooking gas) more and more, it will result in a cascading effect and lead to overall inflation and make household necessities prohibitively expensive due to rising transportation costs, added the study. It also suggested that the government, on its part should streamline all procedures relating to both real estate and automobile sectors and rationalization of tax rates across the country and the industry will continue to grow if these initiatives are considered seriously and are applied to other sectors too.
With agricultural production and trade going up steadily together with compelling need to promote both production and consumption of value added and manufactured goods, the study has suggested that states should rationalize taxes on all items of mass consumption and consumer goods.
“There is a scope to bring down tax rates to promote consumption, thus focus should be on collection without increasing rate of taxes,” said the study. “In view of the growing demand for value added food items, consumer durables and fast moving consumer goods (FMCG), production need to be incentivized to increase tax revenues.”