The civic body had sent a proposal to the state government to share two per cent of the revenue from 2016
The Brihanmumbai Municipal Corporation (BMC) is slowly developing cold feet in forgoing its octroi income and accepting the Goods and Services Tax (GST) which the Centre is looking to introduce from September 2017.
The civic body had sent a proposal to the State Government to share two per cent of the revenue from profession tax, stamp duty and registration last year. However, with no response from the state government, the civic administration is left in quandary on how to prepare budget estimates for the next financial year with no income in sight.
Octroi accounts for 40 per cent of the total revenue in the civic exchequer, and the amount of Rs 7,800 crore is irreplaceable. Civic officials claim that each year, the Octroi income increases by at least 10 per cent and the daily cash inflow through Octroi helps the civic administration carry out day to day financial management.
Now, while preparing the Budget Estimates for the year 2017-18, civic officials are facing difficulty on the issue of projected income to meet the expenses planned for the next year. Civic sources claim that big ticket projects could be affected next year if there is no income to the civic body.
"If the State Government wants unified tax system, it is in the good interest of the city for better business and trade, but the BMC will have to face major cash crunch and State Government has not given any option until now. From which source will we be able to meet this gap in funds?" asked a civic official.
The GST aims at creating a single, unified tax for goods and services across India, replacing other levies — central excise, VAT, octroi and entry tax. The GST will boost the manufacturing sector and accelerate the state's 'Make in Maharashtra' plans.
"However, the decision to compensate the bodies for loss of revenue will burden the already cash-strapped state government. State government is already under tremendous pressure of loans and borrowings. It remains to be seen whether the State Government is ready to part with the income from profession tax, stamp duty and registration," said a senior civic official.
Sources said the State government will have to come up with some plan to mitigate the situation, as other civic bodies will also face a similar cash crunch.
BMC, the richest municipal corporation in the country depends on octroi, property tax and premium on fungible FSI for its cash flow. However, there is limit to which the property tax and premium on Fungible FSI can be increased. Mumbai contributes at least Rs 800-900 crore as profession tax to the State Government and at least Rs 500 crore in terms of Stamp Duty and Registration annually.
REVENUES
Octroi accounts for Rs 7,800 crore, or about 40 per cent, of the total revenue for the civic body, an amount that will be irreplaceable once GST kicks in. Civic officials claim that octroi income increases by at least 10 per cent annually, while the daily cash inflow helps the civic administration carry out day-to-day financial management.
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