GST fallout: Civic body to seek 8% increase in its compensation every year

The compensation amount is yet to be ascertained thus leading to a window open for increase or introduction of new taxes. With the falling crude oil prices, the income from the octroi has been on the decrease for the past two years, and the compensation is likely to be based on the average of last five years’ revenue.

Even before the Goods and Services Tax comes into effect in 2017, the ‘one nation, one tax’ regime may face troubles in the state given the combative stance of civic bodies. The latest in the confrontation is Brihanmumbai Municipal Corporation’s (BMC) threat to impose new taxes if the state government does not agree to an 8% annual increase in revenues for the initial five years.

Brihanmumbai Municipal Corporation(HT PHOTO)

With the GST’s implementation, the octroi duty — BMC’s biggest source of revenue — will be scrapped. It means the civic body will have to rely on the government for funds. The BMC has also written to the state government to ensure a fixed compensation by the 5th of every month, unlike Local Body Tax, where civic bodies have been at the mercy of the state, said civic officials.

Sanjay Mukherjee, additional municipal commissioner, said, “We have communicated to the state government that the quantum of compensation be protected. There should be an automatic devolution and an 8% annual increase every year for the initial five years. We are hopeful that our demand will be met.”

The compensation amount is yet to be ascertained thus leading to a window open for increase or introduction of new taxes. With the falling crude oil prices, the income from the octroi has been on the decrease for the past two years, and the compensation is likely to be based on the average of last five years’ revenue. Mukherjee, said, “We hope that the crude oil prices will be adjusted by the state and the highest revenues of the past five years is considered.”

However, the civic body is also analysing alternative ways of earning revenue, if the request is not accepted and the compensation amount is not over Rs6,500 crore. To cover the shortfall in the revenue, the civic body is studying the effectiveness of introducing new taxes.

After the Sena that has supported the bill in the Rajya Sabha, mayor Snehal Ambekar has opposed the GST citing loss of daily income for the BMC. In a meeting of Maharashtra Mayors’ Council on Sunday headed by Ambekar, she said that Mumbai shall be given a special status and exempted from GST. The mayor has further opined that with the implementation of GST the compensation will be delayed by the state government thus affecting of BMC’s projects.