With no octroi, city will pay more taxes

  • Poorvi Kulkarni, Hindustan Times, Mumbai
  • Updated: Feb 05, 2015 00:57 IST

As the octroi tax — a major source of revenue for the civic body — will be abolished with the introduction of the Centre’s Goods and Services Tax (GST), the BMC is mulling over increasing existing taxes and implementing as many as four new ones soon.

With the GST in place, the BMC will be faced with a revenue loss of Rs8,000 crore that it currently earns from the octroi tax. Traders pay octroi to bring goods into the city.

In his budget speech on Wednesday, municipal commissioner Sitaram Kunte said the BMC will be compelled to introduce new taxes, such as property tax in slums, transport cess, conservancy cess and fire cess to make up for the loss.

“We are studying different revenue sources and will decide within the next year what taxes will be introduced. Instead of increasing the burden on the existing taxpayers, we are considering widening the tax net, by bringing slum properties under it,” said a senior civic official.

Existing taxes are likely to be increased. From June this year, there will be an 8% hike in water and sewerage charges, while property taxes will go up by at least 40% from April.

“The abolition of octroi, which was a crucial factor in budgetary planning for several years, will adversely impact our revenue. In these circumstances, fiscal restructuring of BMC has become necessary,” said Kunte.

To maintain its income, when the BMC detects an unauthorised construction or alteration, it may not just demolish the structure, but also have the owner pay a penalty.

The BMC has planned to undertake periodic hikes in the licence fees and lease rents it collects. It also plans to ask the state to hand over the professional tax it collects, and to allow BMC to retain employment guarantee cess.

The property tax on slums is already being opposed by the Opposition. “If the BMC wants to tax slums, it must first provide residents with basic amenities. The rich are usually taxed, but the BMC is violating this principle by taxing slum residents,” said Rais Shaikh, Samajwadi Party group leader.

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