In a pre-election bonanza, the Maharashtra government on Friday decided to completely waive property tax on residential units up to 500 sq ft located within the Mumbai municipal area limits. This will be implemented with retrospective effect from January 1, 2019.

In the Mumbai municipal area, about 64 per cent of the residential units fall under this category.

Further, residential units between 501 sq ft and 700 sq ft will see a 60 per cent reduction in the tax rate.

The decision to provide the tax relief was taken at the State Cabinet meeting on Friday evening. In all likelihood, it is the last meeting before the Parliamentary election’s Model Code of Conduct comes into force.

A Maharashtra government official said the Municipal Corporation of Greater Mumbai (MCGM) collects property tax of about ₹5,500 crore a year. The latest move will mean a revenue hit of about ₹350 crore. In effect, about 6.36 per cent tax revenue will have to be written off, the official said.

Another senior State government official, who, in his earlier position used to supervise the MCGM budget preparation, said that from 2015, the Shiv Sena has been demanding a tax waiver but this was opposed by State bureaucrats as it meant a loss of revenue.

But later, the demand was hijacked by the BJP, which has now managed to get the waiver cleared “just before the Parliamentary elections,” the official said.

In 2017, the MCGM election manifestos of both the Shiv Sena and the BJP had promised a complete tax holiday for small tenements. There were also attempts to introduce a tax waiver in the MCGM budget itself and plans were afoot to make the announcement in the MCGM Commissioner’s budget speech but were dropped, a second official added.