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Levy and Collection of Revenue (Tax and Non-Tax) in Puducherry and Oulgaret Municipalities

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Levy and Collection of Revenue (Tax and Non-Tax) in Puducherry and Oulgaret Municipalities GUIDELINES FOR COMPLIANCE AUDIT ON Levy and collection of Revenue (Tax and Non-Tax) in Puducherry and Oulgaret Municipalities Office of the Principal Accountant General (General and Social Sector Audit), Tamil Nadu and Puducherry, Chennai-18. 1 INDEX Sl. No. Content Page No. 1 Introduction 3 2 Organisational set-up 3 3 Revenue of the Municipalities 4 4 Audit objectives 11 5 Audit criteria 11 6 Scope of Audit, Methodology and Coverage 11 7 Audit Design Matrix Annexure-II 8 Time Schedule 12 9 Annexure-I 13 2 Guidelines for Compliance Audit on “Levy and collection of Revenue (Tax and Non-Tax) in Puducherry and Oulgaret Municipalities” 1 Introduction The UT of Puducherry consists of five Municipalities, viz., Puducherry, Oulgaret, Karaikal, Mahe and Yanam. The Puducherry Municipality comprises of the erstwhile Communes of Pondicherry and Mudaliarpet. It covers an area of 19.46 sq. kms. with population of 2.44 lakh (as per 2011 Census) and is divided into 42 wards. The Civic Elections to the Municipality were last conducted in June 2006 and the Council’s tenure expired in 2011, following which elections have not been held. Oulgaret (Uzhavarkarai) Municipality is located in the North East of Pondicherry municipal limits. The Oulgaret Commune Panchayat, was elevated to the status of a Municipality on 14 January 1994. It covers an area of 36.7 sq kms with a population of 3.00 lakh (2011 Census) and is divided into 37 wards. 2 Organisational Set-up At the level of Government, the Secretary to the Government, Local Administration Department administers all the Municipalities and the Commune Panchayats in the Union Territory of Puducherry. At the Directorate level, the Director of Local Administration Department functions as a bridge between the Local Bodies and the Government. The Director is assisted by four Deputy Directors, of whom one is the Deputy Director for Municipal Administration, who is in charge of the five Municipalities. The Municipalities are headed by a Chairman who is assisted by the Commissioner and Revenue officers. Consequent to expiry of Council’s tenure in 2011, the Municipalities are headed by Designated Officer who acts as the Commissioner of the Municipalities. All property vested in the Municipal Council shall, until new councillors are elected, vest in the Special Officer. 3 3 Revenues of the Municipalities 3.1 Tax-Revenue: Section 118 under Chapter VIII of the Puducherry Municipalities Act, 1973, provides that every municipal council shall impose the following taxes: a property tax ; a profession tax ; a tax on advertisements other than advertisements published in the newspapers. With the sanction of Government, the Municipal Council shall impose a duty on certain transfers of immovable property in the form of additional stamp duty a tax on entertainments; a duty on toddy trees in the form of additional excise duty on toddy trees; a tax on any building or land within municipal limit used for specific purposes listed in Schedule III of the Act which shall not exceed five per cent of the property tax levied and shall be in addition to the license fees charged for the business activities in the building ibid and the property tax; a toll on animals and vehicles. The municipal council shall pass a resolution for levy of a tax, the rate at which any such tax shall be levied and the date from which it shall be levied. Before passing a resolution or imposing a tax for the first time or increasing the rate of an existing tax, the council shall publish a notice in at least one newspaper, on the notice board of the municipal office and in such other places within municipal limits and by beat of drum, fix a reasonable period not being less than one month for submission of objections or suggestions and consider the objections or suggestions, if any, received within the period specified. (i) Property tax: Property tax shall be levied on all buildings and lands within municipal limits and comprise of a tax for general purposes, a water and drainage tax to provide for 4 expenses connected with the construction, maintenance, of water or drainage works provided or hereafter to be provided, a lighting tax to provide for expenses connected with the lighting of the municipality by gas or electricity, and a scavenging tax to provide for expenses connected with the removal of rubbish, filth from private premises and cleaning of latrines. The property tax on buildings and lands shall be a first charge upon the said buildings or lands (Section 134 of the Act 1973). The property tax shall be levied every half-year and shall be paid by such person or persons within fifteen days from the date of commencement of the half-year (Section 135 of the Act 1973). When any building whether ordinarily let or occupied by the owner himself has been vacant and unlet for thirty or more consecutive days in any half-year, the commissioner shall remit so much (not exceeding one half) of such portion of the tax as relates to the building only as is proportionate to the number of days during which the building was vacant and unlet in the half-year (Section 139 of the Act 1973). Procedure for assessment: The commissioner shall prepare an assessment list of all lands or buildings or lands and buildings in the municipality. The authorised valuation officer appointed by Government for the purpose shall verify the assessment as done by the Commissioner and return the list duly checked and corrected to the Commissioner within a period of two months. The Commissioner shall give public notice of the assessment list. The assessment of every property in the municipal area shall, as far as practicable, be done not less than once in five years and once done shall remain in force for five years. The publication of the authenticated assessment list shall be done not later than the 30th day of June of the year to which the list relates. For the purpose of assessing the property tax, the authorised valuation officer or the Commissioner, as the case may be, by notice, call on the owner or occupier of any building / land to furnish him, within thirty days after the service of the notice, with returns of the rent payable for the land or building, the cost of 5 erecting the building and the measurements of the land and with such other information as may be required and every owner and occupier of whom such notice is served shall be bound to comply with it and to make a true return to the best of his knowledge or belief. Levy of Property tax: Levy of property tax is governed by the Pondicherry Municipality (Assessment of Annual Rental value of Buildings) Rules (the PT Rules), 2000. The Rules provide that the buildings in a municipal area shall be classified by the municipal council on three criteria, viz., Location of building like main road, street etc., use of buildings like residential, commercial etc., and type of construction like building with RCC roof, tiled roof, etc. As per Sub-section (2) of Section 121 of the Act, 1973, property tax in respect of buildings or lands which are occupied by or adjacent or appurtenant to building or both should be levied on the basis of its Annual Rental Value (ARV). Sub-Rule (1) of Rule 5 of the PT Rules, 2000, states that rate of ARV per square feet shall be fixed by the Municipal Council with prior approval of Government having regard to location, use and type of construction of building. Sub-Rule (3) of Rule 5 of the PT Rules, 2000, also states that rental value per square feet of plinth area for different classes of buildings should be published from time to time by Municipal Council with prior approval of Government. Annual Rental Value of different classes of buildings within the municipal areas for the quinquennial period from 1 April 2012 to 31 March 2017 was notified by the Government of Puducherry in March 2012 and for the period from 1 April 2017 to 31 March 2022 was notified in March 2017. Government had directed that from 1 April 2017, the existing rental value for assessment of property tax to be increased at uniform rate of 15 per cent for residential building, 25 per cent for commercial / industrial buildings and 20 per cent for other structures. Concession of 50 per cent reduction in ARV of owner occupied residential building was withdrawn from 1 April 2017 and tenant occupied building ARV to be increased by 10 per cent. 6 Rule 6 ibid provide that Property tax shall be assessed at the rate of nine per cent of the ARV (Tax for general purpose: 7%; Tax for lighting: 1% and Tax for Scavenging: 1%). (ii) Profession Tax: As per Section 144 of the Act, 1973, Profession tax is payable by a company transacting business in the Municipality for not less than 60 days in a half-year and by a person, who exercises a profession, art or calling or transacts business or holds any appointment within the Municipality or outside the Municipality but who resides in the Municipality for not less than 60 days in a half-year. Puducherry Municipalities Act, 1973 was amended in May 2017 bringing in changes in the maximum half-yearly Profession Tax. Assessment of Profession tax: The Commissioner of Municipalities shall assess persons to profession tax on a scale determined by the Municipal Council from time to time. The Commissioner may, by notice, require any employer to furnish within a specified time a list in writing of the names and residential addresses of all persons employed by such employer with a statement of the salary or income of such employed persons.
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