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Industry and trade bodies on Thursday criticised the Maharashtra government’s decision allowing civic bodies to choose between octroi and Local Body Tax (LBT) and termed it as a “retrograde step” which would lead to further harassment and increase in transaction cost.
Indian Merchant Chamber (IMC), which has been at the forefront of opposing octroi since the last three decades, has decided to convene a meeting of its members soon to decide on the future course of action. Further, Federation of Associations of Maharashtra (FAM), which was spearheading the agitation for the withdrawal of LBT, has convened a meeting on August 19 to chalk out an action plan against the government decision.
The state cabinet headed by Chief Minister Prithviraj Chavan on Wednesday had taken the decision in this regard following strong opposition, especially by traders, to the LBT regime which was introduced in phases from 2010.
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IMC president Prabodh Thakker told Business Standard: “IMC is extremely disappointed with the stand that the state government has taken, leaving options to the municipalities. IMC has been against octroi, which we inherited from the British era. Maharashtra is an exception in having continued with the system of levying octroi. IMC urges the state government to reconsider its decision as it will add to corruption, loss of fuel, harassment to traders and would also fuel inflation.’’
Ramu Deora, former president, Federation of Indian Exporters Organisation said the regimes of octroi and LBT are outdated and create substantial revenue leakage and harassment for the business and trading community. “Export and import cargoes are subject to checks at the octroi naka which increases the transaction cost and affects international trade. Since Goods and Services Tax (GST) is going to be brought in from April 1, 2015, all states should cooperate to accept the GST,” he noted.
FAM’s senior vice president Arun Doshi said the trading community was not opposed to paying tax but wanted a simplified and corruption-free system. “The trading community is impressing upon this government to abolish LBT and octroi and subsume it with Value Added Tax (VAT). FAM will further intensify its agitation to press for the abolition of both octroi and LBT,” he added.
Apart from traders, Congress and NCP ministers have pressed for an alternative to LBT, especially after the humiliating defeat in the Lok Sabha poll. Chavan had announced that the municipalities, at their general body meeting, could pass a resolution and again choose octroi as a means for collecting taxes.
Traders had suggested levying of a surcharge on VAT, which could be paid back to the municipal authorities as taxes. However, Chavan added that a committee of experts had examined all aspects of replacing LBT with surcharge on VAT. But it was legally and operationally not feasible to levy such a surcharge.
