Bengal might be on an industrial high, but an Achilles heel is threatening to stop its capital in its tracks.

Spearheaded by 235 IT and IT-enabled services, the number of companies that have set up operations in the state is growing. In Calcutta, however, the steep corporation tax on rent for commercial properties is proving to be a thorn.

At 52 per cent, the Calcutta Municipal Corporation’s tax on commercial property rent is the steepest in the country. The rate is also much higher than that in other places eyeing a share of the IT pie.

The rates are 8 to 10 per cent in Noida, 5 per cent in Gurgaon, 12 per cent in Bangalore and 10 per cent in Pune. Closer home, Salt Lake is sitting pretty with a 10 per cent rate. Even Delhi and Chennai charge 25 and 20 per cent, respectively.

According to Bengal IT secretary G.D. Gautama, the state has to be competitive in every possible way if it wants to achieve a 15 per cent share of the national revenue in IT services and 20 per cent in IT-enabled services by 2010.

For companies that operate out of a built-up space, the rent in Calcutta becomes sky high as it includes the tax, he said.

About 13 IT parks are slated to come up in Salt Lake and Rajarhat with a built-up area of 13.3 million square feet over the next 30 months but few have shown interest in Calcutta proper.

Last year, there was a move to amend the corporation tax act to reduce the rate of tax, especially for IT companies, but nothing came of it.

However, once the Assembly elections are over, the attempt to lower the tax rate is expected to be revived. “Such processes take considerable amount of time and some result is expected post-elections,” said Debasish Som, the former municipal commissioner and the current principal secretary, municipal affairs, Bengal.

The current municipal commissioner, Alapan Bandyopadhyay, echoed Som. “We are in the process of amending the property tax act and carrying out exhaustive research to shift from the present method of operation to the unit area method (area-wise) of taxation. National seminars and workshops have been arranged to this effect,” Bandyopadhyay said.

The amendment bill, now with an Assembly committee, would be taken up after the elections.

“There are quite a few developers who have land within the CMC area, which could be utilised to build IT parks, but they are discouraged from doing so due to the exorbitant rate of corporation tax,” said Pradeep K. Chopra, the secretary of the Bengal chapter of developers’ forum Credai.

An area-wise fixed rate structure, as followed in cities like Bangalore, had also been suggested, but it did not receive any response from the authorities, Chopra said.

Ranjit Sengupta, the director of Cadworld Infosystems Pvt. Ltd, a Calcutta-based IT-enabled services provider, feels that the rent charged on commercial properties in the city is 50 per cent too high.

Another IT-enabled services company, Vishnu Solutions Pvt. Ltd, is moving base to Salt Lake’s Sector V ? the state’s tech hub ? because it needs more space and cannot shoulder the tax burden in Calcutta.

Both Cadworld and Vishnu Solutions agree that companies that are growing would require more space, but they cannot afford to stay in the city.

Apart from Sector V, New Town and Rajarhat are turning out to be the hot spots.

Developers say the long-term effects of high taxation would gradually be felt in sectors beyond IT to include retail, where the need for prime space in the city is crucial.

It would also drive outstation investors to other cities, Rahul Todi, the managing director of Bengal Shrachi Housing Development Limited, cautioned.

He added that if taxes are steep, companies would inevitably try to find loopholes to keep the payments pending. So if the rates are brought down, the collection base will widen and ultimately benefit the government, Todi said.