has recommended for the abolition of octroi and suggested multi-point turnover tax at the flat rate on all commodities including the exempted commodities under the Bombay Sales Tax Act, the Motor Spirit Taxation Act, the Sugarcane Purchase Tax Act as a substitute for octroi. In spite of recommendations for the abolition by all committees no State except Andhra Pradesh has decided to abolish it. On the contrary there are increasing evidence to show that States like West Bengal, Delhi and Goa may introduce it. Village Panchayats too have decided to introduce the same. Municipal corporations and majority of municipal councils in Maharashtra State are opposing to abolish the same as a major portion of their revenue is derived from this tax. They have therefore recommended to the State Government to go slow on the question of abolition of octroi and take final action in the matter by taking into confidence all of them.

It is worth studying here the recommendations made by the Study Group appointed by the Maharashtra Government. In finding out a substitute for octroi the Study Group came to the conclusion that there is no scope for raising the current rates of existing resources available to local bodies as they are fairly high. It also examined various substitutes such as municipal sales tax, municipal surcharge on sales tax, municipal turnover-tax, surcharge on sales tax or additional sales tax, additional onepoint sales tax at a flat rate, licence fees at a graded scale and multi-point turnover tax and finally came to conclusion, that multipoint turnover tax is the only suitable substitute for octroi. It recommended multipoint turnover tax at a flat rate of 76 paise per Rs. 100 turnover on all commodities, including exempted commodities under the Bombay Sales Tax Act, the Motor Spirit Act and Sugarcane Purchase Tax Act. The Group felt that multi-point turnover tax would not only assure the actual amount collected by local bodies by way of octroi in the base year but also ensures them 12 per cent. rate of growth in their revenues. Moreover, the methods of collection would be simple and would not burden the business community in the State of Unnecessary details.

Remedy Suggested

The Study Group feels that the rate. suggested by it is quite low compared with the existing levy. But as there are three or four minimum stages through which com modities pass from the manufacturer to the consumer and at each stage the rate of multi-point turnover tax is supposed to be imposed it is likely that even at the second stage of transaction his rate may exceed the average rate of octroi. On the contrary octroi is a single point tax. It is imposed only once when commodities enter municipal area. The three or four stages at which the rate of multi-point turn-over tax would be imposed may help to rise in prices of all commodities.

Administratively also this substitute would be collected from almost all dealers through whom goods would pass. This may create difficulties to operate it effectively. Moreover, if a particular class of traders is exempted from the sphere of this tax it may create further complications and may indirectly help to push its rate up ward.

Thirdly, the local bodies are guaranteed gross collection after deducting 1.5 per cent. cost of collection. This is no doubt advantageous to them but it would be more advantageous to smaller local bodies in case of whom the cost of collection is very high, but it may not be advantageous to bigger local bodies bigger local bodies as their cost of collection of octroi is quite lower than that of smaller bodies.

Fourthly, the Study Group ensures 12 per cent. rate of growth in their revenues. But available statistics on octroi prove that the growth potentiality of octroi of highly urbanised local areas is quite high. The Study Group ensures them only 1.2 per cent. rate of growth in their revenue. This may create discontent among them.

Fifthly, there is also another question of leakage. It is said that there is on an average 15 to 20 per cent. leakage in the collection of octroi. This is one of the reasons for which they advocate for its abolition, and suggest a substitute, i, e. the multipoint turnover tax, which will

be collected by sales tax department. It cannot be guaranteed that collection of

tax by sales tax department is without leakage. Moreover, multipoint turnover tax will be an additional burden to be imposed upon that department. It may produce adverse effects. There is also a problem of arrears in Sales Tax. It may also effect the collection of multi-point

turnover tax.

Sixthly, octroi collection is effected on the spot which satisfies the daily needs of the local bodies. Even in major municipalities this collection helps to meet the salaries and day-to-day expenditure of the councils. The alternative source may guarantee advance payment. But the collection of amount from the State treasury may create complications which will be difficult for smaller local bodies to tackle.

Then there are other questions of absorption of staff. loss of autonomy of local bodies. Therefore, substitute suggested by the Study Group may not prove to be

proper as it may create more problems and complications.

A suitable alternative would be a Muni cipal Sales Tax at proportionate rate of the present sales tax to be collected by local bodies. Government may fix a paise or two per rupee or one fifth of the existing Sales tax rate to replace octroi. The schedule of rates of Sales Tax may be revised so as to cover larger number of commodities. The present limits of turnover prescribed under the Sales Tax Act may be reduced so as to cover large number of registered dealers. This broadening the base of commodities and registered dealers may help to raise more revenue from this source and consumer may not feel the pinch of it. Moreover, no separate schedule of rates will be required for this tax as would be necessary for multi-point turn over and sales tax. If the collection of this tax is assigned to local bodies the questions about absor ption of staff and local autonomy would be automatically solved.