INDIA BUSINESS WORLD - JUNE 2006
THE MONTH THAT WAS...

NDMC LIKELY TO SLAP SERVICE CHARGES ON GOVT PROPERTIES

   PROPERTIES in Lutyens' Delhi including Rashtrapati Bhawan, Prime Minister's Office, central government offices and diplomatic missions may be made ‘liable' to pay a service charge to New Delhi Municipal Council (NDMC). The government is considering amendment to the NDMC Act, which would empower the municipal body to collect service charges from government establishments in lieu of property tax.

Properties of the Union government, constructed on or after January 26, 1950 , are exempt from property tax. Under executive instructions, however, NDMC is being paid service charges in lieu of property tax. Establishments of the Union government enjoy the special status under Section 65 of the NDMC Act. The need to revisit the Act was felt when it was found that most of the government establishments do not pay their dues as the council's demands could not be enforced in the absence of a legal sanction, sources in government said. By amending Section 65 of the NDMC Act, properties exempted from paying taxes would be made liable for a service charge. With this legal sanction, there would be no difficulty in recovering service charges, sources added. It is also proposed to suitably amend Section 412 of the NDMC Act so that diplomatic missions also pay service charges. Section 412 allows the Centre to exempt any diplomatic or consular mission from paying any tax or other charges.

It is also proposed to revise the existing method of valuation of properties so that service charges are in sync with market rates. The current calculation of service charges is on the historical cost of the building and as most government properties are old, the contribution is not more than Rs 8 crore, which is about 6.7% of revenues from property tax and service charges. This is inspite of the fact that over 80% of the properties in the area belong to the government.