LBT best model to replace octroi in BMC, says panel

The state government should impose local body tax (LBT) as the most effective alternative to replace octroi in Brihanmumbai Municipal Corporation (BMC), as per the findings of an expert committee constituted to conduct a study and provide an alternative model to replace octroi in municipal corporations in Mumbai, Thane, Pune and Nagpur. Chief Minister Prithviraj Chavan on Saturday discussed the issue with finance ministry officials. The state government wants to abolish octroi to usher in more effect, accountable and transparent model of tax collection system.

The committee recommends registration of criminal offence against individuals evading the local body tax. However, it cautions against its misuse suggesting it would be slapped only occasionally in cases where it is must.

The octroi is a tax levied on the goods at the entry in the city. It is taken in cash on daily basis. Whereas, local body tax is a lumsum amount charges on the value of goods. The local body tax is payable within 40 days of bringing the goods in the city.

The chief minister has been under pressure from traders and industries demanding the abolition of octroi in BMC as it creates a lot of hassles and cumbersome.

The Shiv Sena which is ruling party in BMC is staunchly opposed to the abolition of octroi as it fears it would advserly affect the revenue generation for the BMC. The BMC mayor Sunil Prabhu indicated, " Almost 45 per cent of the revenue generated in BMC comes through octroi. He cautions the government against hasty decision in taking the step."

Chavan is confident that local body tax, if implemented effectively , could yield the desired results. As per government data, BMC collects Rs 6,100 crore from octroi collection. The total budget of BMC for 2012-13 was Rs 26,581 crore. The BJP which is an alliance partner of the Shiv Sena in BMC has different views as it wants the octroi abolished. The Congress and NCP will have to resolve their internal differences before taking a decision on octroi abolition.

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