The proposed tax system is expected to make a big dent into the municipal revenues.
Mumbai: Uncertainty over the effects of the forthcoming Goods and Sales Tax (GST) system is hovering over the Brihanmumbai Municipal Corporation (BMC) as it prepares itself to table the fiscal budget for the year 2017-18 on Wednesday. The proposed tax system is expected to make a big dent into the municipal revenues. To offset the loss, there is a possibility of hike in some of the taxes.
The budget layout is likely to be reduced drastically this year as it is likely to be in the range of Rs 26,000-Rs 28,000, with a drop of nearly Rs 10,000 crore. Despite the huge outlay, the civic body was able to spend only on average 40 per cent funds on development works leaving the remaining amount to lapse every year.
Octroi is the biggest source of revenue for the BMC, with a revenue of more than Rs 7,000 crore — 36 per cent of the civic body’s annual income. However, it will be replaced by the GST by July 1 by the central government. Under the new system, the civic body will lose its right to levy octroi on goods that enter its limits, as all indirect taxes levied on traders will be centralised and unified under the GST regime.
In the year 2016-17, the civic body has collected revenues of Rs 7,300 crore from octroi, Rs 5,200 crore from property tax and Rs 4,900 crore from building proposal department. According to the civic officials, the BMC is mulling several measures to make up for the expected loss in revenues.
The BMC, since 2010, has implemented capital value-based system to collect the property tax. While houses under 500 sq mt are exempted from property tax, the civic body is planning to charge more for bigger homes. The eight per cent rise in water and sewerage tax, started from 2011 for five years, is getting over and new rates will be applicable from this year. To compensate the loss, the civic body is planning to hike rates for those who use water more and for high-rise societies.
“In several cases, we make substantial provision in capital expenditure for civic projects in the budget, but they do not get started on time, due to which the proposed funds are not spent on them,” said a civic official.