Maharashtra backs octroi in Mumbai municipal limits post GST rollout

BMC which has a budget of Rs 33,700 cr for 2015-16 collects Rs 7,500 cr annually through octroi levy

Maharashtra government will continue with the octroi levied by the Brihanmumbai Municipal Corporation (BMC) till the Centre make a provision in the proposed Goods and Services Tax (Amendment) Bill to provide assured compensation for revenue loss.

Ruling partners Bharatiya Janata Party (BJP) and Shiv Sena are on the same page on this issue, for a change.

The Shiv Sena-BJP alliance are at the helm of India’s richest civic body since the last 20 years. BMC, with budget of Rs 33,700 crore for 2015-16, collects Rs 7,500 crore annually through octroi. Most of the money is spent on various developmental projects in Greater Mumbai.

BMC is the only civic body in the country that collects octroi.

Shiv Sena has argued that its abolition will adversely impact capital investment, especially in the city’s development projects. Shiv Sena, which is a junior partner in the Chief Minister Devendra Fadnavis-led government in Maharashtra, has succeeded in convincing BJP in this regard.

Therefore, the state government will soon formally appeal to the Centre to allow BMC to collect octroi even after the introduction of GST from April 1. Shiv Sena and BJP reiterated that the Centre will have to assure compensation equivalent to the octroi collection through incorporating a legal provision in the proposed GST amendment bill.

State Finance Minister Sudhir Mungantiwar told Business Standard: “Shiv Sena president Uddhav Thackeray has already raised an objection against the scrapping of octroi after the launch of GST without the Centre’s guarantee for an assured compensation. The state government will make a formal appeal to the Centre.”

The minister said West Bengal, where entry tax is recovered, has also appealed to the Centre for its continuation even after the shift to the GST regime.

Mungantiwar said of the Rs 7,500 octroi collection, BMC gets a substantial revenue by levying octroi on crude oil.

The minister said in 25 other municipal corporations the government proposes to scrap local body tax from August 1 by  enhancing the rate of tax under Value Added Tax Act. He said these 25 municipal corporations will be provided compensation worth Rs 6,875 crore after the abolition of the local body tax.

However, Indian Merchant Chamber Director-General Arvind Pradhan said: “We were expecting the government to remove octroi from Mumbai and make up the loss by increasing the VAT. This unfortunately has not happened. We would like octroi Duty must in any case be abolished and subsumed in GST.”

Various traders’ organisations, including Federation of Association of Maharashtra, have demanded the government scrap local body tax and octroi after the introduction of GST.