Municipal tax sparks protest in Maharastra upcountry

Even as the Vyapari Mahasangh (Maharashtra) was opposing Octroi, 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.

Prakash Purohit, President ACDA, 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.

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.

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.