Aiming to maintain the financial sovereignty of Brihanmumbai Municipal Corporation (BMC), the state government will make a provision in the State Goods and Service Tax (SGST) Bill.

According to Sudhir Mungantiwar, the finance minister, the state will transfer the compensation amount directly to BMC in lieu of octroi. This was a demand made by Shiv Sena. Meanwhile, the state is considering to find out new ways to increase non-taxes as resources as revenue generation since the state will lose its right to increase the direct taxes.

Mungantiwar met Sena chief Uddhav Thackeray on Monday to resolve his doubts. The finance department led by Mungantiwar will submit the draft of SGST Bill to Thackeray to resolve the issues raised by Sena.

In 2016-17, the BMC bagged Rs 7,400 crore revenue from octroi and Thackeray demanded the compensation must be transferred directly to the exchequer of BMC. “We will not beg for our own amount from the state,” Thackeray had reiterated in Aurangabad

According to Mungantiwar, the Bill will have the provision to compensate the amount in lieu of octroi and Local Body Tax (LBT) to BMC and other remaining municipal corporations respectively. “We will frame the law which will make it mandatory for the state to transfer the compensation irrespective of the financial condition of the state,” said the minister.

He added, “The total burden of the state is around Rs 13,500 crore for this year against octroi and LBT and it will increase every year. Considering baseline of 201-17 for income from octroi, we will compensate BMC by the rate of 8% every year as natural growth of income,”

He added that, however, the average revenues collection from octroi was 4%.

Centre will compensate the loss in total income to the state from direct taxes for next five years only. However, the state has decided to compensate all municipal corporations including BMC forever.

Meanwhile, once GST will be implemented, state will lose its right to introduce new tax or increase in tax amount. Hence, state has decided to focus on increase in non-taxes. “At present, state’s income from taxable items is Rs 1.33 lakh crore. After GST, we will try to increase revenue from non-taxable items. At present, we can collect Rs. 16,619 crore from such sources and set a target to reach to Rs 26,000 crore,” said Mungantiwar.