Published On : Sun, Aug 16th, 2015

Was Octroi the best solution?

Does the state government really have money to pay Rs 2000 crores to each municipal corporation in the state?


Politics, Business and Development needs to be kept separate. As they say mixing pleasure with business always has its ill effects. In order to please the traders, the Maharashtra Government abolished the Octroi. This system was established keeping in mind many parameters.

The traders too had learnt and had adapted to the system. Of course there were traders who learnt the wrong means to escape paying the Octroi. The then Government decided to levy the local traders with Local Body Tax (LBT). However, the LBT was made very cumbersome with many documentary requirements. The officials of LBT department of Nagpur Municipal Corporation finally had teeth and they did bite.

Many traders alleged autocratic behavior by these officials. The documentary requirements were such that every trader had to furnish 150 various documents of his purchase and sale etc to pay the LBT. The leaders of the present government, who were then in the opposition had decried or flayed the LBT and had called it the “Looto Bato Tax”. The traders and the business community elected these leaders into power only because they pledged to abolish the LBT.

After a lot of hue and cry, they did announce the abolishment of the LBT. What they never envisaged was the alternate to LBT which fulfilled the revenue for various developmental activities of the Municipal Corporation.

In other developed countries, a system is imposed where the people honestly pay the taxes and avail the services. Picture this: A box is kept wherein one has to put in the cost of the good and take away the goods without being monitored or someone to man the place. People in those countries honestly put the money and avail the product. However, the same can’t be employed here.

The new government claimed that the Goods and Services Tax (GST) will come into force by 2016. Till then the local government has to draw from the revenue which they collected for the last three years and then take out an average amount collected in a particular month and use the amount for developmental activities. The state government will add 10 % to that amount (from LBT collected for last three years) and pay the deficit amount from the total requirement.

Hasty decisions taken without considering long term implications

While speaking exclusively with Nagpur Today, Chairman of Confederation of All India Traders B C Bhartiya said that the abolition of Octroi and then the LBT both was done in a hurry without contemplating long-term-implications. The abolition of LBT will not benefit the Exchequer or the Traders nor the Common Man.

So who is reaping the benefits of this, the Multinational Companies who are continuing to sell their goods on Maximum Retail Price (MRP). The head of the local government should always have an independent source of revenue/income and the powers to spend the money for maintenance and development under his control. Only then can various developmental activities be planned and executed.

Are our traders and common man really independent?

While speaking exclusively with Nagpur Today, Former President of NVCC Dipen Agrawal said that yes! Octroi was a good system of revenue generation but the then government was very stubborn in abolishing Octroi.

Finally after a lot of hue and cry, the government decided to increase the Value Added Tax (VAT) by 1% and abolish the Octroi. This was put into effect throughout the country except Punjab, Maharashtra and one other state. The 1% increased amount generated from the VAT was reimbursed to the local government. Maharashtra too increased 1% in VAT from 4% to 5%, but did not reimburse the amount to the local government.

When the traders and businessmen flayed the move and went on increasing the pressure on the government, they abolished the Octroi and instead levied the LBT.

According to Dipen Agrawal, no other alternate tax needs to be levied since the amount generated by the 1% increase in VAT should be sufficient for meeting the expenses of maintenance and development of the city. Dipen Agrawal went on to say that one Political party proposed the GST during their tenure and the other political party which was in the opposition, opposed the GST tooth and nail.

Now when they have come to power, they are proposing the same GST bill and expect the other political party to pass it. To add to that they have increased some taxes by 25% which the present opposition political party claims should be only 17-18 %. The present opposition political party also wants to include the liquor and tobacco industry into the ambit of GST which was conveniently excluded by the present political party in power.

As a result, it is common man who has to bear the brunt of inflation and rising costs. In the interest of the common man, can’t the political parties keep their animosity aside and pass a bill that is pro-common man?

Dipen Agrawal claimed that this 69th Independence Day, are the traders or the common man free in the real sense or are we still slaves to some political leaders who are passing rules and bills which are not pro-common man for their own ulterior motives?

With financial support from State Govt, it is sufficient to bear expenses

According to the NMC Tax Collection Committee Chairman Girish Deshmukh, the State Government will be giving a sum of 30.98 lakhs to the Nagpur Municipal Corporation. Nagpur Municipal Corporation will receive directly an amount of Rs 60 crores which gets generated by the 1% Stamp Duty on the transfer of property.

The LBT from the import of Petroleum products into the city will come directly into the coffers of Nagpur Municipal Corporation. To add to this the LBT amount of approximately Rs 90-110 Crores generated from trade or business above Rs 50,000 crores will also go into the coffers of Nagpur Municipal Corporation. All this put together (i.e. Rs 30.98 lakhs + Rs 60 Crores + Rs 90-110 Crores = 1,50,30,98,000/-) along with other revenue generated from other rents and taxes is sufficient for development and maintenance of the city.


By Samuel Gunasekharan