Mumbai :The BMC, which is about to present its annual budget for the city on Wednesday, seems to be grappling for funds in the long run. According to standing committee chairman Yashodhar Phanse, the BMC can’t help but hike the contentious property tax and the premium on Fungible FSI in the long run to make up for a loss of about Rs 7,000 crore if octroi is abolished from the next financial year.
The Central government in December initiated legislation for the much awaited reform of the indirect tax system by tabling the Goods and Services Tax (GST) Bill in the Lok Sabha. The GST proposes a national sales tax that will replace a range of overlapping state duties that deter investment. If the Bill comes into effect from the financial year 2016-17, local self-government bodies like the BMC will lose the right to levy octroi or LBT. FPJ recently quoted additional municipal commissioner Dr Sanjay Mukherjee who said that there is a need for a viable economic model for the city once octroi is abolished and that the BMC is studying the matter. And so, on Monday, Phanse reiterated this statement, further demanding that the State government make a representation to the Government of India in the matter. He demanded that Mumbai, which earns up to Rs 7,000 crore from octroi collection, be made an exception to the rule since it will hamper the civic body’s finances.
“If not, the BMC will have a hard time managing its finances. Under the current provision, we can generate up to Rs 1,500 crore from Fungible FSI and not more than Rs 1,000 crore from property tax. In case there is no other source, we will have to hike them both to make up for the loss,” Phanse said.
The BMC has already proposed a change in the calculation of property tax by 1.20 per cent on the carpet area instead of 1 per cent. Otherwise, the BMC would lose 22 per cent of its revenue per annum if the tax is calculated on the basis of carpet area without any hike. Thus, it has proposed 20 per cent additional costs on the carpet area calculation to match the revenue, which was widely opposed by corporators since the beginning. And so, if octroi is abolished after the GST Bill comes into effect, property tax will have to be hiked even further. Similarly, the BMC will have to hike the premium on fungible FSI.
“How do we run the BMC otherwise? The Central government might reimburse the civic body for the first five years after the GST bill is brought in but that will be a long process. Until then, the BMC will require an alternative. Otherwise, we will have to ask the State government to take care of some aspects of civic administration,” Phanse said.
Tanvi Deshpande
