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Mumbaikars face taxing times as BMC looks to cut its GST losses

In 2015-16, the civic body will also impose a penalty on illegal building structures in the city.

Written by Tanushree Venkatraman | Mumbai | Published: February 5, 2015 3:04:46 am
bmc, bmc budget, mumbai Of the estimated total revenue income of Rs 23,509.10 crore for 2015-16, the revenue from octroi is estimated to be the highest at Rs 7,900 crore. (Source: Express Photos)

Mumbaikars will have to brace for taxing times ahead with the BMC planning to charge cess on many of its services from the next financial year 2016-17 since its primary revenue earner octroi is likely to be phased phased out soon.

Of the estimated total revenue income of Rs 23,509.10 crore for 2015-16, the revenue from octroi is estimated to be the highest at Rs 7,900 crore.

Dwelling on “a life without octroi” from 2016, Municipal Commissioner Sitaram Kunte, while presenting the BMC budget for financial year 2015-16 on Wednesday, stressed on the immediate need to overhaul the civic body’s financial system, which means residents will have to pay an additional amount for every service – from the garbage collected from their doorstep to the public transport they use.

Mumbaikars can also expect a hike in property taxes this year since the civic body has estimated its income from the source to go up by 14 per cent.

“The new taxes like property taxes on slums, transport cess, conservancy cess and fire cess are some of the available alternatives for increasing the municipal revenue to meet our future revenue and capital expenditure requirements. We might also look at raising rents and fees collected by various departments periodically,” Kunte said in his budget speech.

In 2015-16, the civic body will also impose a penalty on illegal building structures in the city.

Apart from this, the corporation is also expected to ask the state government to hand over professional tax collected in Mumbai to the BMC. At present, Mumbai generates Rs 800 crore in professional taxes paid people who earn a steady income or professionals such as chartered accountants, lawyers and doctors. Now, Kunte has proposed to increase the collection to Rs 1000 crore.

The BMC will also create a model to tax slum properties in the city, which is expected to add an additional Rs 1,000 crore to the civic body’s coffers.

The BMC’s search for alternative sources of income is the direct fall-out of the looming GST, which is set to replace all indirect taxes, including octroi. This will lead to a loss of about Rs 15,000 crore for the civic body.

Last month, Kunte and senior BMC officials had met officials from the Central government to arrive at a compensation model, which could be adopted to cut the losses. Though the union government will provide for a five-year compensation for possible revenue loss due to the implementation of GST, Kunte said the civic body was not clear on the compensation model yet and so it was imperative to look at alternative sources.

“Besides this, the Seventh Pay Commission will also come into effect the same year, which is further expected to increase the salary and pension expenditure. Being a service provider agency primarily, we have to look to alternative sources of income to replace such a huge loss,” Kunte said, adding that the BMC departments would work out an effective financial model by the end of this year. “We cannot evolve taxation model overnight. We have to prepare proposals with requisite permissions and amendments to the law,” he added.

Samajwadi Party corporator Rais Shaikh said, “If there is a shortfall in revenue, any local body’s first choice would be to tax the richest and not the poor. We will definitely oppose the BMC’s move on taxing slums.”

tanushree.venkatraman@expressindia.com

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