The state government will compensate the BMC for losses once the all-India Goods and Services Tax (GST) replaces octroi — the tax charged on goods entering the city.
A major part of the BMC’s finances comes from octroi, and the Shiv Sena, which heads it, said it would support the BJP’s new tax regime only if BMC was compensated for this loss.
The state has now said it will make up for the losses by paying the BMC the same amount it earned through octroi in 2013-14 (Rs6,755 crore — its highest revenue in five years) and hike this amount by 8% every year. The BMC has been apprehensive of losing this revenue after the July 1 rollout of GST, and as a result, the state is still unsure what stand the Sena will take during the special session to pass the State Goods and Services Act on May 20. Finance minister Sudhir Mungantiwar said the state has assured the Sena it would safeguard the civic body’s income. “All 26 municipal corporations, including BMC, will be compensated based on their best income in the five years preceding 2015-16. The BMC’s highest collection from Octroi was in 2013-14, and the first year’s compensation with a rise of 8% will be Rs7,314 crore. We have spoken to Sena leaders, who wanted it to be 14% as the state gets that much from the Centre as compensation. But the Centre’s compensation will be only for five years, and state’s devolution to civic bodies will be lifelong. This will be ratified in the Act we will pass in the special session,” Mungantiwar said. The minister clarified the Centre cannot directly compensate the BMC — as demanded by the Sena — as there is no such provision in the law. Admitting to Sena’s demand of the compensation in advance, the state has decided to release funds in advance every month. In response to Sena’s aggressive stand on how the GST will lead to losses for BMC, BJP leaders have pointed out the civic body’s earnings from Octroi in the last two years had dipped.