The state government has decided not to abolish Octroi. However, it has allowed municipal corporations the option to choose between Octroi and local body tax (LBT). Civic bodies can chose between the two by passing a resolution in its general body meeting and submitting the decision to the government, said chief minister Prithviraj Chavan on Wednesday. The decision to give options to corporations was taken at the state cabinet meeting on Wednesday.
Why did the state decide not to abolish octroi?
Chavan said the govt had been mulling imposing value added tax (VAT) instead of Octroi and LBT. "But VAT is not a viable option. Besides, BMC has refused to implement VAT and LBT. It wants to stick to the decades-old Octroi, which is its main source of revenue. So, we cannot have Octroi in some corporations and LBT and VAT in others. The corporations will now have to decide which tax they want to impose. If they want to bring back Octroi, they should move a resolution to that effect in the general body meeting and submit it to the state govt for approval," said Chavan.
What is the CM's stand?
The chief minister actually wanted to abolish Octroi and impose LBT across the state. He had earlier said Maharashtra was the only state where Octroi was still being charged. However, at the press conference on Wednesday, Chavan denied being adamant about abolishing Octroi and implementing LBT. "The business community had suggested putting LBT in place, therefore we implemented it. Now they have come out against it, so we are giving corporations the option. They can either have Octroi or LBT," Chavan added.
How does Octroi benefit the BMC?
BMC chief Sitaram Kunte said the state had earned nearly Rs 13,000 crore through Octroi. "Of this, BMC earned almost half. So, it's our main source of revenue," he said.
However, BMC's decision to retain Octroi has got to do with politics more than anything else. Shiv Sena president Uddhav Thackeray refuses to accept LBT in the Sean-BJP-controlled civic body. According to him, abolition of Octroi would damage the financial independence of the corporation. "Once Octroi is abolished, we may be forced to beg for funds from the state govt. How will we pay our employees? We should have our own revenue-creating system and Octroi has been one of the best system in that category for the past several decades," said a Sena leader in BMC, requesting anonymity.
The LBT factor
The trading community had taken umbrage at the implementation of LBT, and are angry with the Congress-NCP combine. And NCP chief Sharard Pawar is for abolishing LBT ahead of the assembly polls. "CM Chavan was reluctant to do this. He refused to accept that the ruling dispensation had lost the Lok Sabha polls due to LBT. His contention was that Congress-NCP had lost in Mumbai too where there was no LBT. But NCP was for an amicable solution to the issue, and so the CM decided to keep both LBT and Octroi, leaving the final decision to the respective corporations," said a senior Congress leader.