Why a potential property tax in Jammu and Kashmir has drawn protests from local parties

The Centre has empowered the administration of Jammu and Kashmir to levy property taxes on land and buildings within municipal areas across the Union Territory. If the administration acts on it, citizens in Jammu and Kashmir will have to pay property taxes for the first time.

Regional parties like the People’s Democratic Party and the National Conference are up in arms about the Centre’s decision, calling it a “grave injustice” to the people of Jammu and Kashmir. Regional parties allege it is part of a slew of exploitative measures taken by the Centre since August 5, 2019, when Jammu and Kashmir was stripped of special status under Article 370 and split into two Union Territories.

In 2010, a Jammu and Kashmir coalition government consisting of the National Conference and the Congress did try to introduce a property tax. But local opposition to the idea of a property tax runs so deep that the plan had to be shelved.

Reorganising Jammu and Kashmir

Last year, Parliament passed the Jammu and Kashmir Reorganisation Act, repealing many of the laws of the former state and replacing them with Central laws. On October 5, the Union home ministry released the Union Territory of Jammu and Kashmir Reorganisation (Adaptation of Central Laws) Second and Third Orders, 2020.

The 136-page notification extended 11 more Central laws to Jammu and Kashmir and amended the former state’s municipal laws. That included the Jammu and Kashmir Municipal Act and the Jammu and Kashmir Municipal Corporation Act, both passed in 2000.

“Unless exempted under this Act or any other law for the time being in force, property tax shall be levied on all lands and buildings or vacant lands or both situated within the municipal area,” says the amended Municipal Act. “The property tax shall be levied at such percentage not exceeding fifteen per cent of the taxable annual value of land and building or vacant land or both, as the Government may, by notification, from time to time specify.”

The Municipal Act categorises urban areas under municipalities and municipal corporations. Small and medium towns are to be managed by municipal committees and municipal councils, respectively. The capital cities of Jammu and Srinagar are managed by municipal corporations.

The amendments also propose a Jammu and Kashmir Property Tax Board, run by the Union Territory administration, to oversee the process of taxation. Taxpayers have the option of paying taxes in one instalment or two instalments.

The October 5 notification also removed all references to “permanent residents” in the amended laws. The phrase belongs to Article 35A, also repealed on August 5, 2019. Under the Act, the state government had the power to define “permanent residents” of Jammu and Kashmir and reserve certain rights for them. That included the right to own land in the former state.

‘Naya Kashmir’

Within days of the home ministry notification, regional parties met to formulate their response. In a statement issued on October 9, the National Conference pointed out that the decision to enable property tax was taken in the middle of an economic depression and “soaring unemployment” in Jammu and Kashmir.

“Far from doling out fiscal help and other supportive measures, the government... wants to suck the life and blood of people,” the statement said. Property taxes would “will overburden people, who are struggling to make ends meet”, it pointed out.

Waheed Ur Rehman Para, youth president of the People’s Democratic Party, tweeted his condemnation of the proposed tax: “It’s penalising existence and inheritance.” Para saw it as an attack on Kashmiri Muslim identity. “Government is justifying 5th August in name of development - Vikas,” he continued. “However In ‘#NayaKashmir’, non-locals get domicile’s, Jobs, land, contracts, houses under real estate policy, financial aid under PM package. While those who live here will face property tax on own properties.”

When the Centre passed the legislative changes last year, Prime Minister Narendra Modi had promised to build a “Naya Kashmir”. In the Valley, however, the phrase is associated with National Conference leader Sheikh Abdullah’s manifesto, also called “Naya Kashmir”. As the manifesto was implemented under early National Conference governments, it strengthened land rights for ordinary people in Jammu and Kashmir, especially the rural poor.

Senior People’s Democratic Party leader Mohammad Khurshid Alam equated the property tax with exploitative tax regimes of the past. “The property tax order smacks of the despotic and anarchic rule the people of this land have witnessed for hundreds of years when we were crushed under the heavy burden of taxation,” he told a local news agency. “It is nothing but the revival of that dark, dreadful and disastrous era to which Kashmir’s blood-soaked history is synonymous.”

A taxing decision

Memories of exploitative tax regimes, especially under the Dogra kings who ruled before 1947, run deep in Kashmir. In 2010, when the National Conference-Congress government tried to impose a property tax, it took three years for the bill to go through both houses of the state legislature. Opposition parties were up in arms against the bill. This was in keeping with Central guidelines for urban reform across the country. They proposed ways to raise funds to build infrastructure in cities, among other things. Central funds for urban reform depended on states implementing such a tax.

Nawang Rigzin Jora, a Congress party leader from Ladakh and then minister of urban development and urban local bodies in Jammu and Kashmir, said the state government had “deliberately” delayed implementing the tax. “We decided to not implement it after thorough deliberations because the socio-economic status of the people of J&K was not good,” Jora explained. “We deliberately put it in abeyance.”

In 2012, Jammu and Kashmir lost 10% – Rs 46 crore – in Central funds for urban reform after it failed to implement the property tax. “Both the coalition partners took a joint stand and I, as a minister, was the one who took the decision to not implement it,” said Jora. “Even when we made the J&K Property Tax Board, we made it dysfunctional. We didn’t appoint anyone for the board.”

‘Not the right time’

If the economic environment was not conducive to a property tax then, it is even worse now, as businesses reel from a year of lockdowns: the first was imposed to quell dissent against the August 5 decisions and the second aimed to curb the spread of the coronavirus.

The Kashmir Chamber of Commerce and Industries has estimated that Kashmir’s economy has lost over Rs 40,000 crores since August 5, 2019, and 5 lakh people have lost jobs over the past year.

Local businessmen, already struggling to pay taxes such as the goods and services tax, are not happy. “People are having issues with the filing of GST and it looks a burden to them,” said Sheikh Ashiq, President of Kashmir Chamber of Commerce and Industries. “The reality is that the capital has vanished. It’s not the right time for this tax. There’s a unanimous view that this shouldn’t be implemented at the present moment.”