State moots cess on city traders

Levy may compensate for losses due to the abolition of octroi

The state finance department has directed the Brihanmumbai Municipal Corporation (BMC) to introduce a cess upon city traders in place of the octroi that was phased out six months back.

The new cess, sought to be introduced from April 1, 2005, will be enforced by both the civic administration and the sales tax department. The cess is also expected to make up for the Rs 600 crore revenue loss suffered by BMC owing to the scrapping of the octroi.

According to a senior secretariat official: "The BMC has been directed to compile a list of traders falling under its jurisdiction. In a proposal that is aimed at curbing corruption at the enforcement level, two distinct departments of the state "" the BMC and the sales tax department "" will jointly be monitoring the returns filed by traders and the cess will be based on this returns."

A missive dispatched by the state finance department to the BMC has directed all municipal councils in the state to begin levying the cess from traders from April 1.

The proposal envisages the traders filing their returns along with books of accounts to the BMC, indicating the amount of cess payable by them. Of this, five-ten per cent would be dispatched to the sales tax department for its scrutiny.

After this, the sales tax department would send the records back to the BMC with instructions for further action on compliance issues.

The BMC would then seek more details on the returns filed by the traders or carry out the orders issued by the sales tax department against the traders.

According to the official, the involvement of two distinct departments will thwart any chances for corruption at the collection stage of the cess.

"It was noticed during the octroi regime that civic officials (entrusted with the task with levying octroi) would indulge in rampant corruption in collusion with traders by undermining the value of goods coming into Mumbai. As a result, the revenue collected through octroi was greatly undermined. Still the BMC used to collect Rs 600 crore annually as octroi," the official said.

He added that since the BMC and the sales tax departments are distinct agencies, the former, which will collect the cess, would be monitored by the latter, leaving little scope for collusive corruption.

Following the phasing out of the octroi, the state government was liable to compensate the BMC for the revenue loss of Rs 600 crore annually. The new cess is expected to generate Rs 1,000 crore annually, according to the official.