First the power cuts, then increased diesel price and now hike in property tax. These are turning out to be taxing times for IT companies in Chennai, reports CNBC-TV18‘s Swathi Narayanan.
First the power cuts, then increased diesel price and now hike in property tax. These are turning out to be taxing times for IT companies in Chennai, reports CNBC-TV18's Swathi Narayanan.
State civic body Chennai Corporation is trying to increase its revenues and has zeroed in on it companies. It has hiked property taxes for IT companies in the city anywhere between 50-200%. The current property tax paid by these companies stands at just over Rs 3 per sq feet. However, in April, they will have to shell out between Rs 4 and 27 per sq feet depending on their location. An unhappy software industry is now complaining about being singled out.
Arun Jain, CMD, Polaris said, “One cannot differentiate for what purpose a property is being used. I don’t think so it's a good idea to differentiate industry by industry.”
The timing of this move could not have been worse. Companies are already reeling under power cuts of 2 - 4 hours and are forced to use diesel generators and with diesel prices increasing their operational costs are already sky rocketing. Now with the property tax hike, rentals will go up. Even though big companies like Infy and Cognizant may not be affected to a large extent, mid and small companies in Chennai, however, are likely to be hit.
B Sriram, ED - Tax & Regulatory Services, PwC said, “I believe this will be more impacting and pinching more on the smaller ones as compared to the larger ones with what the rental rates are going up and the occupancy rates are low. I am sure this will certainly impact by both the owners of the building and the tenants.”
Also with this move, property tax that IT companies have to pay in Chennai is higher than what is being paid by companies in neighboring Bangalore. Industry body Nasscom is speaking to the state government to see if any respite is possible.