New state government may abolish Octroi and LBT

It was one of the promises made by the BJP as part of the Assembly elections campaign; CM Devendra Fadnavis had said LBT should also be abolished

The new state government may soon abolish the decades old octroi system in Mumbai, as it was one of the promises made by the Bharatiya Janata Party (BJP) during the Assembly elections campaign.

Vehicles at the Dahisar toll naka. Octroi exists only in Mumbai, it has been replaced by LBT elsewhere in Maharashtra. File pic
Vehicles at the Dahisar toll naka. Octroi exists only in Mumbai, it has been replaced by LBT elsewhere in Maharashtra. File pic

Recently, newly appointed Chief Minister Devendra Fadnavis had also said that octroi and LBT (Local Body Tax) should be abolished. The new tax system the government is planning to introduce is not known, but sources say it will be GST (Goods and Services Tax). The Central government had suggested GST to the state some time ago.

The Brihanmumbai Municipal Corporation (BMC) earns more than Rs 7,500 crore per year through octroi. The abolition of octroi will affect the civic body’s income if the new system does not earn that much revenue. The BMC had done a study on GST after the state government asked it to.

Based on it, some officials feel GST will not give the same results. “The state government might implement GST which may not be that effective or as big a revenue generator. But we have got hints to start working on the abolition of octroi,” said a senior officer from the Octroi Department, who did not want to be named.

Another officer said there is no official communication about this. “Officially there is no information regarding octroi abolition in BMC. I will check if it is going to happen,” said Law Committee Chairman Gyanmurti Sharma, who looks after the Octroi Department. Octroi exists only in Mumbai, it has been replaced by LBT elsewhere in Maharashtra.

While it will be tough for BMC to find an alternative for octroi, retailers and traders associations seem to be happy about the new government’s announcement. “Octroi abolition will definitely help end corruption and the harassment because of this tax.

Also, if GST will be implemented, it will be a paperless system and this will be helpful. We will support the government if it is going to abolish octroi,” said Viren Shah, president of Federation of Retail Traders’ Welfare Association.

Octroi history
Octroi was introduced in Maharashtra in 1965. The BMC was expected to implement LBT from 1 October last year, but there was major protest from retailers and traders against it, forcing the government to change its decision. Retailers and traders had demanded octroi as well as LBT be abolished, in other municipal corporations.

What is GST?
Goods and Services Tax (GST) is a comprehensive tax levied on manufacture, sale and consumption of goods and services at the national level. Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain. Under octroi, the BMC levied tax on the entry of goods in municipal areas.

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