If BMC has its way, the cost of alcohol, automobiles, fuel and tobacco in Mumbai will continue to be higher than most cities in the country, even after the Goods and Services Tax (GST) is implemented from 2016.
The Brihanmumbai Municipal Corporation (BMC), which gets a major chunk of its revenue from these commodities through octroi, has sought the state government’s permission to exempt them from GST and levy a different tax (through an e-payment method) on them for the initial five years. Its aim: To curtail its financial dependency on the state after the Good and Services Tax (GST) is introduced next year.
Last month, the Lok Sabha passed a legislation that will introduce GST from April 1, 2016, leading to the discontinuation of octroi tax on goods. Once adopted, GST is expected to replace the layers of local and regional taxes under a single unified tax ambit.
So, while the implementation of GST is widely expected to lead to reduction of prices of most commodities, especially these four items, the city will continue to pay a premium on them.
Octroi paid for alcohol, automobiles, fuel and tobacco contributes to 45% of revenue collection — around Rs3,000 crore — to the BMC’s kitty. The expected revenue collection from octroi for 2015-16 stands at Rs7,900 crore.
“We are exploring all the options to maintain the buoyancy of the revenue collection with abolition of Octroi tax from next year. We have suggested a list of products to be exempted from the GST for the initial five years and also proposed methods of providing compensation,” said Sanjay Mukherjee, additional municipal commissioner.
Along with this, the BMC wants to collect professional tax directly, without any intervention from the state government. At present, the government collects the tax and hands it over to the BMC. The civic body also plans to hike the overall professional tax collected from Rs800 crore to Rs1,000 crore.
If the state approves these suggestions, then the Centre, along with the state, will only have to compensate the BMC for the remaining 55%, for which the civic body has suggested a method of e-payment on a fixed date every month. This will allow the BMC to fund the various development projects in the city easily. The GST bill has offered compensation package to states for potential revenue loss up to the first five years.