The civic body earns 33 per cent of its total income from octroi. Representation Pic

Fearing possible financial instability due to the phasing out of the revenue-generating octroi starting July, the BMC has demanded a whopping Rs 7,000 crore from the state government. The civic body has already written to the state finance ministry requesting the aid.

As per the decision taken by the Centre, all types of existing tax systems will be abolished and a uniform tax system called the GST will come into effect starting July 1. Among other taxes, the civic body’s octroi system will also be abolished, following which the corporation is slated to lose Rs 7,000 crore every year.

According to an official from the assessor and collection department in the BMC, the shutting down of octroi will have an impact on the civic body. The civic body earns 33 per cent of its total income from octroi. "To fight this we need financial support from the state and Centre on priority basis," said the official.

Recently, the civic body wrote a letter to the state to provide compensation of Rs 7,000 crore instead of the already sanctioned amount of Rs 6,300 crore. Dr Sanjay Mukherjee, additional municipal commissioner, confirmed the development. "We have requested the state to consider the compensation on the basis of our annual income from octroi for the year 2016-17. This year it [octroi income] has crossed R7,000 crore. The state has promised to a give a 10 per cent annual hike on the final compensation for the next five years."

According to civic officials, in 2015-16, the octroi revenue had witnessed a fall after prices of crude oil dipped. At the time, BMC had managed to earn Rs 6,300 crore against their own set target of R7,000 crore. While finalising the proposal for financial aid, the state had considered the income generated in 2015-16. However, this year, the revenue from octroi is set to cross R7,000 crore. It has already crossed the R6,600 crore-mark, a source said. The BMC has requested the state to consider the compensation amount on the basis of the octroi collected in 2016-17.