Thursday, August 19, 2004

Octroi back in new garb

From The Hindu

The Karnataka Special Tax on Entry of Certain Goods Bill, 2004, awaiting the Governor's assent, is something that local bodies including corporations, city municipal corporations, and even gram panchayats will welcome with enthusiasm. They have long been denied the revenue source of octroi after it was abolished in 1978, and are forced to depend on the State Government for their meagre financial resources doled out from the Consolidated Fund.
Although local bodies may collect profession tax, trade licence fees, advertisement fees, tolls, market fees, entertainment tax, property tax and such other levies, it is a fact that the Government has gradually wrested control over most revenue streams and administers them as a State subject.
Those who have long argued that local bodies should not have to depend on the Government for revenue, see hope in the new Bill on Entry Tax.
Octroi in new form
Official sources told The Hindu that the proposed Bill was, in many ways, the return of octroi in a new form. The Karnataka Special Tax on Entry of Certain Goods Bill, 2004, says, in the preamble, that the Entry of Goods Tax Act, 1979, which replaced octroi, covered only dealers and specified commodities and left out non-dealers. As the old Act covered only registered dealers and taxed only specified goods, substantial revenue was lost though the goods were consumed in a local area. The new legislation seeks to correct that position, it is stated.
However, if the State Government does not specify and make over the entire collection of the new tax to the local government, it may be challenged before the High Court on constitutional grounds. The new tax will be easy to administer as the local body will depend on the Commercial Taxes Department, and there will be no additional manpower and administrative costs in collection of this tax. Administratively, the department will collect the tax at check-posts. The new tax will be revenue-buoyant as the tax base will constantly expand with rising prices or with inflow of goods from outside the State, giving the local body a buoyant tax revenue source.
On a rough estimate, if the Bangalore Mahanagara Palike can expect to mop up an additional revenue of at least Rs. 100 crores annually from the new taxation measure, a gram panchayat can hope to see revenue collection of at least Rs. 1 lakh, which accounts for one-fifth of its annual budget. Sources said that even if the Government ended up losing hold on the local bodies, the entry tax on a variety of goods would act as a deterrent for buying goods from outside the State.


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