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OIL seeks tax clarification

May 28: Oil India Ltd (OIL) has sought clarifications from the Guwahati Municipal Corporation (GMC) on its decision to bring the company’s crude pipelines that pass through the city under the purview of property tax net.

The company sought the clarification after the GMC informed OIL about its decision to impose property tax on the company’s crude pipelines located in the municipal area.

The GMC has demanded Rs 3.42 crore as one-time settlement of arrears and over Rs 31 lakh as annual tax for the pipelines.

The pipelines division of OIL has written to the GMC asking it to explain the details and the basis of the calculations adopted to determine the arrears and the annual property tax payable by the company.

A GMC official said, “The OIL has in principle agreed to pay the tax. It has only asked the details of and the basis on which we have calculated the payable amount.”

He said the annual tax amount had been calculated on the size of the land — 775 bigha, four katha and three lessa — on which OIL has laid its pipelines.

“The amount fixed for one-time settlement of the arrears is very nominal because the land value was calculated at the government-approved rate, which is much lower than the present day market rate. Had we calculated it at the market value, the amount would have been somewhere around Rs 28 crore,” he added.

Justifying the corporation’s decision, he said the GMC Act had empowered it to collect property tax for commercial utilisation of vacant land in the areas under its jurisdiction.

“Even though the OIL pipelines were laid in 1960s, we have calculated the arrears from 1974 till 2008. The OIL had never paid any property tax to the GMC and the corporation had also not pursued the matter with OIL in the past. We have decided to bring the OIL pipelines under the tax net to improve the precarious financial condition of the corporation,” he added.

The GMC has taken 1974 as the cut-off year because it started functioning from that year even though the GMC Act was passed in 1971.

“If the OIL pays the property tax to the GMC it will be a big relief for the corporation, which is facing a financial crisis primarily because its expenditure exceeds its revenue,” the official said.

The corporation is now meeting the deficit with the government’s non-plan budgetary support and a share of different taxes like entertainment tax, stamp duty and motor vehicle tax. The GMC even diverts its development funds at times to meet its expenditure.

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