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BMC parts ways with the 52-year-old octroi system after GST

On Friday, for the first time in its history, the Brihanmumbai Municipal Corporation (BMC) parted ways with the 52-year-old octroi system. With the civic body still uncertain about its revenues from the Goods and Services Tax (GST) regime, it has asked all its departments to cut down its expenditure significantly.

The GST will replace the octroi system, which is the biggest source of revenues for the BMC. With collections over Rs 7,000 crore, octroi contribute 36 percent to the civic body’s annual income.

The octroi was first implemented in the city during the year 1965. Before this, the BMC used to collect town duty from the goods entering the city. After the abolition of octroi system, the BMC is likely to get a monthly reimbursement of Rs 480 crore from the GST, which will be rolled out by July 1, said civic officials. “However the compensation still fall short of about Rs 1,000 crore from our yearly octroi collections. We are still not sure what exactly the exact remuneration will be,” said a senior civic official.

Due to ambiguity over expected GST share, the civic body has directed all its departments to reduce the amount of money spent on civic works for the time being. “While the spending on development projects will not be affected, we have been asked to cut down the other expenditures drastically. It will take nearly two to three months to understand the exact effect of GST,” he added. “We have received collections of Rs 1800 crore from the octroi till June 30. The octroi nakas have been told to stop functioning from 12 midnight,” said Sanjog Kabre, assistant municipal commissioner, assessment and collections.

But sources said, the BMC has not yet received an official notification from the State Government about the implementation of GST from July 1.


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