State may get Rs 7,000 crore octroi compensation

Cash-strapped Maharashtra is set to get some relief with the Goods and Services Tax (GST) Council on Tuesday agreeing to compensate the state for loss of revenue since the abolition of octroi in Mumbai. The state could get compensation to the tune of Rs 7,000 crore because of this decision. State finance minister Sudhir Mungantiwar was firm on his stand that the state should be compensated in lieu of elimination of octroi, and the council went along with it.

Mr Mungantiwar is in Delhi to attend the three-day meet of the GST Council chaired by Union finance minister Arun Jaitley.

On the first day of the summit on Tuesday, he succeeded in convincing the council of his stance. “We are happy that we will get compensation against octroi once the new system is applied by abolishing octroi in Mumbai and local body tax (LBT) in other municipal corporations and municipal councils across the state,” he said.

Before it was done away with, BMC used to collect octroi worth Rs 7,000 to Rs 8,000 crore. As such, if the GST Council had disapproved his proposal, the state would have had to compensate an equivalent amount from its own exchequer, Mr Mungantiwar explained.

He confirmed that as per the Union budget, BMC was entitled to an amount equivalent to octroi collection based on 2015-16 and every year, there would be an increase of 14 per cent.

Maharashtra and Punjab were two states where both LBT and octroi were present, he said and added that the council had considered their demand and given big relief. He stated the Union finance department would make provision for the compensation from its own budget.

The council had agreed to compensate 14 per cent of the total revenue collection of the state for a period of five years, he said.

The new system will be implemented across the nation from April 1, 2017. Once the final slab of taxes on various goods and services is finalised, the GST bill will be presented before the state legislature for passage.