Municipal corporators from various civic bodies in Maharashtra have moved the Bombay High Court challenging the June 1 notification of the state government introducing local body tax on the entry of goods in the limits of cities in lieu of octroi.
Hearing one of the petitions on the issue, Justice Sharad Bobade and Justice Rajesh Ketkar last week granted a stay on recovery of local body tax for entry of goods in city limits of Nashik Municipal Corporation and also ordered continuation of octroi.
The judges asked the state's Advocate General Darius Khambata to argue the matter on behalf of the state government as the Bombay Provincial Municipal Corporation Act has been challenged.
The bench also allowed time to the state government till September 6 to file a reply.
However, hearing petitions filed by municipal corporators of Kolhapur, Kalyan-Dombivali, Ulhasnagar, Bhiwandi and Thane, on another occasion, the judges did not grant any stay, saying they would first hear the Advocate General before passing any interim orders.
Octroi is a percentage tax levied on the entry of goods into the city, while local body tax is a lump-sum amount charged on the value of the goods. While octroi is collected in cash on a daily basis, the local body tax is payable by the person within 40 days of bringing goods into the city.
The government is favouring local body tax as it feels that this step would remove the rampant corruption prevailing in the state because there would be no need to employ contractors to collect octroi. In the newly introduced local body tax, a lump sum amount has to be paid by the traders or the manufacturers or the owner of the goods within the specified time limit.
However, one of the petitioners, Gulzar Kokani, Standing Committee member of Nashik civic body, argued that 80 per cent of the revenue of a Municipal Corporation is generated from octroi. This money is generally used for the development of the city undertaken by the civic body.
If local body tax is implemented in lieu of octroi, the daily flow of money would stop and instead the money would come in the form of tax after 40 days. Thus development works would suffer, counsel for the petitioner S M Gorwadkar argued.
For instance, he pointed out that Nashik Municipal Corporation has to contribute more than 30 per cent amount in Jawaharlal Nehru Urban Development Scheme. This amount comes from octroi. If the daily collection of octroi is not done and civic body depended on local body tax, which may come after 40 days, the money flow for development work would suffer.
The petitioners further argued that the impugned notification is bad in law as the state government has not invited objections from public at large for the implementation of the local body tax. Even general bodies of municipal corporations have not been consulted on the issue, it was argued.