BMC considers cess of all kinds to cut GST losses

Even as the cash-rich Brihanmumbai Municipal Corporation readies to present its budget for 2015, the civic body is considering alternative sources of income before the proposed Goods and Services Tax (GST) regime comes into effect in 2016.

Civic officials said the BMC stood to lose an estimated Rs 15,000 crore in annual revenue once the GST is implemented.

Municipal Commissioner Sitaram Kunte said, “We are looking at different options to collect revenue and have presented a few ideas to the revenue secretary.

"Kunte, along with senior civic officials, also presented a preliminary model to Chief Minister Devendra Fadnavis last week, which could be adopted to cut the losses.

A civic official said, “One of the options to be considered is to charge a cess for major services provided by the civic body, like solid waste management (SWM) and education. Departments that entail a huge expenditure, for instance the roads department, will also start charging a cess."

BMC has set aside Rs 7,774 crore as part of its three-year plan for improving roads and undertaking repairs. It had allotted Rs 2,685 crore for education and Rs 2,236 crore for the SWM departments in the last fiscal. As per sources, the commissioner has also directed major departments like water, SWM and roads to look at options for increasing the civic body’s revenues.

With a revenue target of over Rs 7,700 crore for the current financial year, octroi is one of the primary sources of income for the civic body, apart from property taxes.

Officials confirmed that the introduction of GST will mean that the BMC will have “no legal rights” to collect octroi. Termed as the “biggest tax reforms since 1947”, the GST is aimed at free flow of goods and services within the common market in the country.

Though the government will provide for a five-year compensation for possible revenue loss due to the implementation of GST, civic officials say it is imperative to look at other sources of income in the next two years.

“The share that the civic body gets among all other local bodies can be significantly lower. Also, if a department spends a huge amount of money in providing services, it ought to recover payment for these services,” said another official.

Officials, however, have confirmed that octroi and property tax will continue to remain the primary sources of income for the fiscal 2015-16.