Maharashtra wary of losses if octroi is scrapped

  • Surendra P Gangan, Hindustan Times, Mumbai
  • Updated: Mar 25, 2015 22:30 IST

As the Centre’s Goods and Services Tax will come into effect from April 2016, the Maharashtra government is getting jittery about the losses it may have to face.

The GST, a single national uniform tax levied across India on all goods and services, will mean the state will lose collections under the octroi in the city.

Both the Bhartiya Janata Party (BJP) and the Shiv Sena have been pushing for octroi to be continued in the city. In a recent representation made to the Centre, the state demanded not only for the continuation of octroi in the city, but also for a legal framework for how compensation for the losses will be distributed to the state exchequer.

Like Maharashtra, the Karnataka and West Bengal governments have also demanded the continuation of entry taxes in key cities to avoid losses.

Octroi and LBT collections from 26 municipal corporations in Maharashtra yield a revenue of around Rs14,000 crore for the state, including Rs8,000 crore in Mumbai.

A fourth of the Brihanmumbai Municipal Corporation’s (BMC) revenue is from octroi collection, most of which is collected from taxes on crude oil.

The losses the state will be faced with has brought together the usually squabbling allies. “Shiv Sena president Uddhav Thackeray insisted the octroi be continued and for a legal provision for assured compensation for the loss faced by the state government. We have demanded an amendment to the bill that will be introduced soon,” said finance minister Sudhir Mungantiwar.

With the state already announcing it will scrap the local body tax (LBT) in 25 municipal corporations and introduce an alternative, finance department sources said restructuring of the tax regime is expected to increase the tax burden on Mumbai.

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