Octroi taking its toll on M'shtra industries

The octroi system is taking its toll on the industries of Maharashtra. Despite having implemented the Value Added System (VAT) last year, the octroi continues.

Though the government had given an assurance on the abolition of octroi, industrialists say, no concrete steps have been taken in this direction. At present, the state charges octroi in the range of 1 to 7 per cent depending on the commodity.

Hemant Rathi, senior vice president, Maharashtra Chamber of Commerce, Industry and Agriculture said, "Only three states in India "" Punjab, Gujarat and Maharashtra have octroi. VAT is so structured that there is no need of any other local tax. The state government had promised that once VAT is implemented, octroi will be removed. But no initiative has been taken so far and octroi continues to be levied, affecting the industries of the state."

"We are already reeling from an excise duty of 16.32 per cent. And in addition there is 12.5 per cent of VAT. At the same time for every purchase we make, there is an additional cess of 1 per cent. Over and above all of these, there is 4.5 per cent (average) of octroi on the product," said K S Churi, president, Small Scale Entrepreneurs' Association (SSEA), Trans Thane Creek.

If the manufacturing cost of an item is Rs 100, its selling price will be more than Rs 135. "If duties take the cost to such a high level, how will manufacturers survive amid decreasing import duty," Churi asked.

"There should only be a single window system for tax collection as it is in VAT. When VAT is already implemented in the state what's the need for additional taxes like octroi. We want the tax system to be in paper form and not in cash form as it is in octroi system. Moreover, what is the gaurantee that the octroi collected at the toll plazas go fully to the corporation," said Satish Anand Shetty, vice president, Taloja Manufacturers' Association.

"Octroi is increasing the burden resulting in industrial units closing down. The government is not realising that if the industries will keep shutting and migrate to some other place it will lose revenue. For industries, octroi is not an encouraging policy from the government. It should be abolished at the quickest point of time" Churi added.

Dinesh Parekh, president of Thane Belapur Industries Association (TBIA) said, "Octroi is an obnoxious way of collecting tax. Industrialists are being harassed at toll nakas. There is huge corruption there. Barely 15 per cent of the tax collected goes to the government."

He added that in the last five years textile units and pharma units have shifted their bases to far off places.

"There are no incentives given by the government. In other states like Gujarat, Rajasthan and Himachal massive investment has been made for the units which got shifted from Maharashtra," Parekh said.

He stressed that "When VAT is there already, all other taxes must go as it is not good for the industrial health of the state."

Octroi in Maharashtra generates revenue of about Rs 5,000 crore which is collected from 22 Municipal Corporations.

And around Rs 1,000 crore is spent on administrative purposes leaving behind Rs 4,000 crore.

Since VAT is implemented, state has generated additional revenue of Rs 2,500 crore during 2005-06. The figure is expected to go upto Rs 6,000 crore in the current fiscal.

"This additional Rs 6,000 crore will compensate the loss of revenue by abolition of octroi. With this there will be no need for the government to continue with octroi," said Rathi.