Mumbai Plans to Impose Tax on Garbage to Increase Revenue

Brihanmumbai Municipal Corporation, the nation’s richest municipality has been plotting ways to boost revenue. Currently, the municipal corporation is facing downtrend in the revenue generation due to the slowing economy, particularly earnings from real estate. Two of the ways it has figured is imposing taxes on garbage collection and additional levies on services such as issuing birth certificates.

The revenue collected during the last year was 5% less than the target amount of Rs.238.5 billion rupees through 31 March. The deteriorating finances of the city, which has a budget bigger than many other cities of the country has become bothersome. Local expenditures have a greater impact on the country’s economic revival as compared to any other administrative strategies planned. 

As of now, Mumbai plans to increase spending by 9% in the upcoming financial year. The expenses target covering better storm-water drains to prevent flooding during the monsoon, and the construction of the coastal road that connects the shoreline from Marine Lines. On the other hand, it is uncertain how these goals will be achieved given the tax revenue generated on the sale of apartments and offices has missed the year’s target by 12%. 

Also Read: Union Budget 2020: Not All Deductions Are Disallowed in New Tax Regime

Considering the drop in revenues, the corporation plans to adopt measures for resource mobilisation. Credit Analysis and Research (CARE) has suggested recovering the outstanding dues of property tax and water tax by following up with the defaulters through notices, disconnection of water connections, attachments, and auction of properties.

Based on the metrics, Mumbai’s municipal body expects a drop of 11% in returns on its investment of Rs.786.7 billion due to lower bank interest rates in the upcoming financial year. In addition, there are no signs of getting any additional compensation from the Central Government. 

Until 2017, the city earned one-third of its revenue through octroi or entry levy. This is now replaced with GST across the nation. However, Prime Minister Narendra Modi had promised to compensate for a portion of the reduction in the income. Due to the economic slowdown, the Prime Minister hasn’t been able to keep up his word beyond September. The due sum will be dispatched in two instalments said the Junior Finance Minister Anurag Thakur.

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in.

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