Octroi abolished in Gujarat: Civic bodies to suffer Rs 1,800-cr loss

After about 150 years of existence, octroi — a local tax levied on entry of commodities and material in seven key towns and cities of Gujarat — was abolished, which would result in a collective loss of Rs 1,800 crore per annum for the civic bodies.

The State Government would have to amend the related municipal laws and take steps to offset this loss to the civic bodies, which was depended heavily on octroi and whose financial dependence on the Government would increase.

The State Government had taken an in-principle decision on June 6, to abolish octroi, being opposed by the State’s business and trade community for decades, and subsequently announced to scrap it altogether from November 15.

The seven cities in whose municipal limits octroi was being levied are: Ahmedabad, Vadodara, Rajkot, Surat, Jamnagar, Bhavnagar and Junagarh.

Earlier, in 2001, the then Chief Minister Mr Keshubhai Patel had abolished octroi from municipal limits of 141 smaller towns and civic areas in Gujarat.

Octroi rates varied on commodities and items, with the minimum being 3 per cent of the price.

On most items, it varied between 4 and 8 per cent of the price. One of the biggest beneficiaries of scrapping of Octroi would be the automobile sector in these cities where consumers were paying between Rs 800 and Rs 1,500 for two-wheelers and between Rs 8,000 and Rs 15,000 on cars as Octroi.

The Ahmedabad Municipal Corporation, which accounted for almost half of all octroi collected in Gujarat, had collected Rs 508 crore until November 13 and expected to end the fiscal with an octroi revenue of Rs 845 crore had it continued.

A number of small towns had emerged as trading hubs on the periphery of larger ones as the business community set up their warehouses and godowns outside municipal limits to escape octroi. Now, with its abolition across Gujarat, these towns may feel the pinch in case the businesses move back to the cities.