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OCTROI IN GUJARAT: A Major Hurdle

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DQC News Bureau
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Octroi rules are so obtuse that often authorities themselves are not sure how

to implement these for various IT products. Octroi should be abolished forthwith

and the state government should collect additional sales tax which it should



allocate to cities on a pro-rata basis.

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Channel partners in Gujurat are going through a lot of trouble due to octroi

duty. As a channel partner and president of a traders’ association, I have

gone through enough octroi problems.

WASTE OF TIME AND MONEY



One facet of the octroi menace is that it demands productive time from

partners. When the material is delivered from a delivery godown outside octroi

limit to the customer in the state where octroi is levied, at least one hour is

wasted per invoice.

Many times, the invoices presented by us are not accepted by authorities and

are challenged. Original purchase invoices are asked, which further delays the

process and exposes our pricing details as well as profits. In such cases, a

temporary receipt is given. This means we have to go to the octroi office within

a month to settle the issue.

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Normally a consultant is hired to settle the claims, which saves us the

hassle of wasting time at the octroi office. But at the same time, it burdens us

with additional cost, because we are charged at least Rs 150 per invoice. If one

forgets the settlement, we get court summons in one or two years, which means

hiring consultants again for Rs 500 per case.

Octroi delivers a deadly blow on products that have been bought back which

attract octroi on the full value of the product. This despite the fact that

octroi on the entire amount had been paid at an earlier juncture. For example,

if a new PC worth Rs 50,000 has been bought back for Rs 10,000, the octroi is

being charged on Rs 50,000.

AUTHORITIES ARE IGNORANT



The duty structures for different products are confusing and often

authorities themselves are not aware of these. A case in point is the UPS which

attracts higher duty than a fax machine!

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If a customer places an order for both these products, you will have one

invoice for it. But you will be charged higher duty rate for both and your

customer will refuse to pay the extra charge.

There have been cases when lower duty was charged knowingly and then

challenged within five minutes at the same octroi post. The vigilance department

is then called and the car is forced to park at the octroi station for a few

days. Incidents of this nature have occured in the past and can be proven.

THREATS AND PENALIZATION



In spite of requests to authorities to charge the differential amount in

octroi, vigilance department officials often visit the dealer’s office to

check all records under the pretext of "sthala tapas" (on the spot

inspection).

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This usually takes a week and the dealer’s staff has to help the

authorities, besides doing their normal work. You are treated like a criminal

though you have done nothing wrong and penalized with a sum abruptly. According

to the authorities, the fine charged is eleven times the octroi avoided!

Authorities give a receipt for the amount. But the receipt does not mention

anything about charging eleven times the octroi payable. It just says amount and

octroi at correct charges!

Even though there are so many anamolies involved in octroi fines, dealers

shell out the money because they are threatened that they will be served a legal

notice. This entails carrying all sales records to the octroi office for months,

during business hours.

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Another reason why dealers go through these irrational practices is that all

past records are considered to be sealed on the day the penalty payment is made.

In fact, most dealers prefer to "invite" octroi officers every

alternate year to get their records sealed once and for all.

WARRANTY REPLACEMENTS AND OCTROI



Octroi problems are compounded when products are warranty replacements or

repaired ones coming from outside the state. Octroi is levied even on

replacements and dealers are asked to pay and then claim refund. Which again

calls for the service of a consultant to avoid running from pillar to post.

As a result, customer service suffers. Vendors give replacements only outside

octroi limit. Who will bear the duty for these products? Let us consider the

case of a 17"/19" color monitor costing Rs 10,000. The duty on this

product comes to Rs 250, which is more than the profit margin that a dealer

earns!

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Non-warranty products that have been repaired also face the same problem. At

times it is better to give a new box rather than repair the old.

DISTRIBUTION SUFFERS



Normally material is stocked in a godown outside the octroi limit. It is

then dispatched to other cities by road transport only. You cannot send by

courier, through train or carry personally because you again end up paying

octroi.

While tranporting through road, long journeys have to be undertaken, even if

there are shorter routes, because these fall within city limits. Though the

facility of "M" form is available to escape this problem, it is very

time consuming and incurs another overhead. Also, if you receive goods by air,

you have to pay octroi or use "M" form because the airport falls

within the octroi limit.

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Often vendors send demo products for display in shops or at exhibitions, but

octroi is charged on these too. Though You can claim refund, the cost of claims

is high. You can ask for exemption, but that will entail another bout of endless

rounds of the octroi office.

To receive permission to get these items into the city without paying duty,

you have to approach the octroi office months in advance or have good relations

with the relevant officers. And despite going to such lengths, octroi raids are

conducted at the exhibitions or business premises.

Naishadh

Diwanji
is the

President of Ahmedabad Computer Merchants Association and Federation of IT

Associations of Gujarat. He can be contacted at
ndiwanji@icenet.net

ARCHAIC RULES



All these archaic and unnecessary rules and regulations have made octroi the

hated concept in channel business. This torturous procedure can be avoided

simply by collecting more sales tax and allocating this additional amount to

cities on a pro-rata basis.

The nuisance called octroi, lays only additional burden on business people

and wastes their time and money. All distributors and dealers have to have two

locations in each city, adding further to the overall operational cost. And,

most importantly, the customer too suffers, because partners cannot provide

proper service.

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