Aurangabad Even as the Vyapari Mahasangh (Maharashtra) was opposing Octroi (tax levied on the entry of goods into a municipality or any other specified jurisdiction for use, consumption or sale), the Maharashtra Government's proposal to abolish Octroi duty in 15 D category cities municipal corporations and further replace it by local cess (municipal tax) has not gone down well with the trade bodies and IT associations in these cities.
The government's decision that was announced on August 26, 2009, will affect municipal corporations including Kalyan-Dombivli, Ulhasnagar, Bhiwandi, Mira-Bhayander, Malegaon, Sangli, Kolhapur, Solapur, Aurangabad, Nanded, Akola, Amravati, Jalgaon, Ahmednagar and Dhule. The proposal is likely to come into effect from April 1, 2010.
IT Associations and IT dealers across the above 15 cities have joined hands with their respective Chamber of Commerce departments and Maharashtra Vyapari Mahasanga to oppose the new proposal and ensure uniformity in taxation across Maharashtra. As already reported in The DQ Week on August 10, Amravati Computer Dealers Association (ACDA), Aurangabad IT Association and dealers in Akola had earlier held strikes and staged protests demanding abolition of Octroi in their respective regions.
Giving an insight into the proposed tax structure, Prakash Purohit, President ACDA stated, “In the initial format, every time goods entered any “D” category city of Maharashtra, a parcel checking was carried out and Octroi was levied on the same. As dealers, we used to negotiate the Octroi amount in the absence of a tax invoice. This process took two to three days and the material never reached us directly. The proposed tax will see municipal corporations collect a local cess (municipal tax) from the traders including IT channel partners.”
Purohit further elaborated that the proposed tax will make entry of goods hassle free and the dealers can get the material directly to their offices/godowns. However, on the flip side this will further create an imbalance in taxation structure across Maharashtra.
“We had demanded abolition of Octroi and do not want it to be substituted by yet another form of tax. While the government has announced its decision around abolition of Octroi, it has not really solved our purpose. We are waiting for the elections to get over and if the new government would also want to implement the above tax (municipal tax).Then, ACDA and several other IT associations across the 15 cities will look at ways to oppose it,”added Purohit.
Sharing his view on the government's decision, Atul Saha, President, Vyapari Mahasanga Maharashtra, reiterated, “VAT was implemented in 2004 and when we approached the government around a year back, the officials promised to abolish Octroi. Since Maharashtra is the highest VAT collection center for the government, abolishing Octroi would mean heavy revenue losses for the government.”
In the 15 D category cities cities of Maharashtra, the private parties responsible for collecting tax garner no less than Rs 500 crore (as part of Octroi collection) on an annual basis. “We are demanding abolition of Octroi and do not want it to be replaced by any other form of tax. In addition we want uniformity in tax across Maharashtra. Octroi payment is resulting in heavy losses for us as none of the industries want to enter these 15 cities of Maharashtra. We are waiting for the assembly elections to get over and will discuss our plan of action accordingly,” Saha quipped.
Citing an example of the nature of business loss, Purohit of ACDA elaborated, that a city away from Amravati that has been declared Octroi free zone is bound to attract more buyers. Hence if an IT dealer in this region does not hike the price of the products, a customer based out of Amravati will prefer buying products in bulk from this place rather than purchase it from within Amravati.
Yet another Sangli based dealer, Praveen Naik, Proprietor, Veetrag Computers opined, “Instead of having this new form of tax, the government could have thought on the lines of hiking the VAT amount by adding a surcharge on VAT. The new form of taxation will require purchase and sale assessments to be submitted to the municipal authorities, which is very time consuming process. Further this may also lead to malpractices towards municipal corporations and business losses for dealers like us.”
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