Octroi alternative issue taxes Council chiefs forum

MUMBAI, May 23: The State Government's recent decision to abolish Octroi in Municipal Councils appears to have received quite a stoic res...

MUMBAI, May 23: The State Government8217;s recent decision to abolish Octroi in Municipal Councils appears to have received quite a stoic response from the the Municipal presidents even though many pointed out that a similar exercise in other States had proved disastrous.

Though the State has promised to shell out an equivalent amount of each Council8217;s octroi collection per month for the next five years with an addition of ten per cent every year as grant, the question remains what can replace the Octroi which has been the councils8217; major source of revenue. The State started out by alloting about Rs 450 crore this year for the grant in lieu of octroi to the 230 municipal councils.

The most likely alternative solution would be introduction of cess on entry of goods a naka less8217; octroi on the lines of the account-based cess levied in Navi Mumbai, said Jayraj Phatak, secretary, Food and Civil Supplies. A conference of all the 230 Municipal Council presidents in the city, today, to discuss an alternative toOctroi however displayed how shallow the interests of most council chiefs lay. For immediately after Mahadev Shivankar, Maharashtra minister for finance and planning left the hall, the entire congregation was reduced to a spattering for the main discussion.

Shivankar who inaugurated the conference organised by the All India Institute of Local Self-Government strongly advocated that octroi, an archaic law, should be abolished completely from the state. He promised that each district collector will be given checks of the Govt grant in lieu of the octroi revenue by the first of every month. But at the meeting several municipal presidents reported that they had not received the money yet.

Others like Deepak Kesarkar, president of Sawantwadi Municipal Council feared that delays would soon be a regular phenomenon. 8220;Worse still we might lose our financial independence and restrictions may be imposed on our expenditure,8221; he told Indian Express later.

Kesarkar who echoed the views of his other councilchiefs, added that a fixed ten per cent addition to the grant yearly which is based on the 1997-98 octroi collection was also unfair to many Councils which report an increase of 18 per cent in their revenue through octroi per year. 8220;A loss of eight per cent translates to even Rs 10 lakh,8221; he informed. He felt that entry cess would be the only option available to them now and felt that the State should make the necessary legislative proposals soon.

Municipalities depend heavily on octroi collection as it contributes to an average 70 of its income while property tax adds only 15-20 to the income. Hence the other suggestion made by Phatak was that property tax structure should be changed and collection system improved besides water tax should be increased. He said that entry cess would however be the best and only alternative to replace octroi.