Gold, silver and diamonds are subject to octroi duty if imported or purchased from other states or from outside Mumbai and sold in the city. The civic body says only 58 traders now pay octroi, which is set at 2 per cent of the value of the items.

Joint Municipal Commissioner (Improvements) V Radha, who is in charge of the octroi department, said that while there were more than 600 registered traders in the city, only 58 paid octroi.

“The sale of diamond, gold and silver in the city is much higher but the BMC gets a pitiable amount in terms of octroi,” she said. “Moreover, it is difficult to monitor the import and exports of these items as traders do it discreetly, many times they bring diamonds tucked inside briefcases or in their pockets.”

Traders are required to maintain a statement of account providing details of purchase and sale of items in the city. They are furnished to the BMC every year after certification by a chartered accountant.

Deputy Assessor and Collector (Octroi Collection) J W Jarande said that the BMC managed to collect Rs 2.86 crore octroi in 2007-08. “From April 1 to January 2008, the collection of octroi on gold/silver and diamond items is Rs 2.87 crore,’’ he said.

Navinchandra Mehta, president of the Diamond Merchants Association, confirmed the decision.

“Traders have been sent notices. Since it is legal to pay octroi they have to produce statements to the BMC but not all traders do this. Some do pay the charges,’’ he said.

The Gem and Jewellery Export Promotion Council has also issued a statement on its website saying it had received a notice from the BMC and urged members to fall in line.

While traders and diamond industry insiders agree that defaulters should pay octroi, they also want octroi on diamond to be completely abolished.

Convenor diamond panel, Gem and Jewellery Export Promotion Council, Bakul Mehta said that there has been an understanding between BMC’s octroi department and traders on the issue.

“Domestic consumption in the city is very low. Uncut diamonds are in the city for processing. But there are a number of operational difficulties which are resulting in loopholes,’’ said Bakul Mehta, convenor of the diamond panel at the council.

Although he agrees that octroi should be paid for polished diamonds sold in the city, Mehta said there were instances when the BMC had raised claims on intra-trade and in disputed cases.