A permit application to go under public scrutiny is for a second supermarket and more retail space including medical centre, town square and petrol station at the Warburton Highway-Britton Road site.

Chandler Ward councillor Graham Warren denied his involvement in a propaganda flyer but urged residents to have their say on the proposal.

Speaking at last Tuesday's council meeting, Cr Warren said it was important for the people of Seville to decide on what was best for their town.

"No doubt if this development goes ahead it will change the face of Seville forever - that being the case, it's important for people of Seville to have their say."

Lyster Ward councillor Samantha Dunn slammed the "wholesale transformation of the town" labelling it a complete overdevelopment.

The permit to rezone the site from both a business 1 and residential 1 zone to purely a business 1 zone will limit residential development close to town.

Seville, with a population of 1730 (according to 2006 Australian Bureau of Statistics figures), is a local centre with the primary role of providing convenience needs to residents, Cr Dunn said.

Jason Entwistle, part-owner Seville IGA, fears the town cannot sustain the large retail space nor deal with extra traffic issues.

He said that it did not make sense that Seville, with 15 per cent of the population of Lilydale, would have 67 per cent of the same supermarket space.

The new proposal will transform Seville into one of the largest retail centres in the shire and is 30 per cent larger than a similar proposal put to council in 2007.

An independent economic assessment of the proposal has found it would have "little impact" on the Seville IGA.