Gujarat removes octroi from 7 districts: traders divided

Gujarat today announced it will scrap octroi from seven municipal corporations of the state. However, according to government sources the decision will be effective from November which is yet to be clarified by the state.

The octroi removal will come with an alternate levy of tax as the government has asked the Ministry of Finance to figure out a viable option to octroi.

The seven municipal corporations where octroi would be removed include Ahmedabad, Vadodara, Rajkot, Surat, Jamnagar, Bhavnagar and Junagadh.

However, the state's decision widens the rift between the state traders. A faction has always insisted on removing octroi without any alternative and they have threatened to continue the agitation and even to set up a new traders representative body in the state.

The rift is likely to worsen in the near future with Parag Tejura, president of Saurashtra-Gujarat Vepar Udyog Mahamandal, threatening to create a parallel body. Gujarat has promised to scrap octroi from the seven municipal corporations in the state but with some optional taxes so that it does not lose revenues amounting to Rs 1,800 crore per annum.

The Gujarat Chamber of Commerce and Industries (GCCI) has accepted this term of the state government however, many trader organisations like Saurashtra-Gujarat Vepar Udyog Mahamandal demand abolition of octroi from these seven cities without imposing any other optional leavy.

They argue that the government cannot collect any other tax after the implementation of Value Added Tax in the state.

Vajubhai Vala, Minister of Finance on Tuesday, after a meeting with mayors of the seven cities and representatives of the trader organisations declared that the government will abolish octroi from the seven major cities of the state before the forthcoming assembly elections scheduled in December.

However, on Wednesday the government announced that the state has decided to remove octroi from all the seven municipal corporations. On Tuesday Vala said the government has invited suggestions from various sectors how the government should go about this without losing a major chunk of revenue.

The government is earning around Rs 1,800 to Rs 2,000 crore from the octroi from the seven municipal corporations including, Ahmedabad, Vadodara, Rajkot, Surat, Jamnagar, Bhavnagar and Junagadh. Ahmedabad alone earns Rs 702 crore per annum from octroi.

The government argues if they abolish octroi from these cities they will lose a major chunk of revenue which will hamper the development plans of these cities. So if octroi has to go it has to be replaced by other means.

GCCI welcomed the decision calling it this a for state's traders. Pankaj Patel, the outgoing president of GCCI told Business Standard, "We welcome this decision. GCCI never demanded the complete abolition of octroi without finding any options. The government will decide a date from when the decision will be effective. We had suggested some options from where the government can supplement the revenue which they will lose in the wake of lifting of octroi. They will work out a plan on those suggestions."

However, organisations like Gujarat Vepari Hit Rakshak Samiti and Saurashtra-Gujarat Vepar Udyog Mahamandal still have doubts on the government decision.

Jayendra Tanna, President, Gujarat Vepari Hit Rakshak Samiti, told Business Standard, "Its a late decision but we welcome it. However, we have doubts about the government decisions till we get to know the fine details of the decision. We expect that the government keeps only one tax assessment system."

Parag Tejura, president of Saurashtra-Gujarat Vepar Udyog Mahamandal, declared a war against the state government and GCCI while talking to Business Standard.

"GCCI is an empty box. It does not represent traders and does nothing to safeguard the traders interests. It is controlled by the state. We dont want any alternate taxes. We will continue our agitation till the government abolishes octroi from these seven Municipal Corporations. We are going ahead with the plans to set up a parallel traders' body and the agitation continues. There are rallies planned in Surat, Ahmedabad, Rajkot. Not a single trader is with GCCI," he claimed.

If we look at the backdrop of the whole controversy it seems the issue has become a mess since implementation of VAT. The BJP government, when Keshubhai Patel was the CM, had promised the abolition of octroi from the state.

However, he did not fulfill his promise. Narendra Modi, in 2002, during the assembly election campaign had promised to scrap octroi. He did fulfill his promise to some extent by removing octroi. However, seven municipal corporations were still left with octroi.