Octroi Revenue Of U. P. Municipal
Bodies

It may be mentioned at the very outset that at present, out of the five KAVAL towns, only Varanasi and Allahabad Corporations are levying octroi duty on all the nine categories of goods we have discussed earlier.6 The Kanpur, Agra and Lucknow Corporations followed this practice till 1896-97, 1920-21 and 1929-30 respectively whereafter they started imposing terminal taxes instead, the only exception being animals brought for slaughter which continue even now to be charged octroi. The income from octroi in respect of these Corporations is, as such, too insignificant, to be worth detailed analysis. We have therefore, limited the analysis to the two Corporations of Varanasi and Allahabad. It may further be noted that the change-over from refund

able to non-refundable system of octroi by these two Corporations makes, the annual figure for the period before and after changeover not strictly comparable.

A study of octroi receipts, as such, .e., excluding receipts from terminal tax and terminal toll, of all municipalities in the State (Table-1) during 1949-50 to 1959-60,7 shows that the revenue from this source went up by about 61% over the period, (from Rs. 137.6 lakhs in

6. Please refer to page No. 4.

1949-50 to

7. In the absence of figures for the years after 1959-60, it has not been possible to cover the period from 1960-61 to 1964-65.

Rs. 221.7 lakhs in 1959-60). It may be noted that the "revenues from this source are mainly influenced by the economic base within the area which rests on factors like the degree of urbanisation and industrialisation, diversification and expansion of agriculture and industry, movement of prices, growth of trade and commerce, changes in the habits of

consumption, rise in the level of incomes, the number and skill of working class, the geographical location of the towns, and the efficiency of the tax collecting machinery."8 This average increase of about 6% per annum on an average in the case of all municipalities in U. P., over the period of a decade, may be largely explained in terms of an increase in the general price level especially after 1951 leading to increased octroi duty on goods subject to ad valorem rates, increased flow of goods owing to increase in population and consumption as also increased business activily in municipal areas, increase in the number and percentage of municipal bodies levying octroi and changes in the rates of octroi. As against this rise in the absolute amount of octroi revenue over 1949-50, we find that the relative contribu

tion of octroi revenue to the total tax revenues and total incomes remained approximately the same in 1955-56. Since then, however, both these percentages show a considerable decline. This may be explained in

8. Dr. A. C. Minocha: "Finances of Local Bodies (urban) in Bhopal, Mahakoshal, and Vindhya Pradesh" published in Quarterly Journal of Local Self Government, Bombay, Oct-Dec., 1964, p. 148.

terms of a higher per cent of increase in the total revenues of municipalities on account of levy of other direct taxes and greater increase in rates of taxes other than octroi, etc., and a still higher percentage increase in total income these bodies mainly on account of increased financial assistance in the form of grants-in-aid from the State Government.

Studied against this background, the increase in octroi revenue of the five Corporations (Table-2) does not appear to be so pronounced (it being only 56% or an average increase of 5.6% per annum over the period from 1950-51 to 1960-61) as against 61% in the case of all municipal bodies in U. P. over the period 1949-50 to 1959 60. Since 1960-61, however, the rise hss been much more pronounced (51% over 5 years or an average of 10% per annum). Among other reasons, the formation of Corporations, with increased area and population, in in the KAVAL towns in 1960 might have been an important contributory to this steep rise in octroi receipt over 1955-56 (Lucknow Corporation is the only exception). A comparative study of columns (7) and (15) of Table 2, further reveals that while the rate of increase in octroi revenue was faster in the three Corporations during 1950-51 to 1955-56 than that in the two Corporations of Varanasi and Allahabad, it increased at a much faster rate in the case of the latter over 1960-61 to 1964-65. In fact, the trend in total octroi receipts of all the five Corporations (Column 17 of Table-2) is mainly the result of the trend in total octroi receipts of Allahabad and Varanasi (Cols. 6, 7, 14, and 15 of Table-2). As between Varanasi and Allahabad, the increase is much more pronounced in the case of Varanasi Corporation as com. pared to that in the case of Allahabad Corporation throughout the entire period of our study.

Though comparative figures of the relative contribution of octroi duty to total tax revenues and total incomes of all municipal bodies in U. P. after 1959-60 are not available, yet a comparison of figures in columns (7) and (8) of Table-1 with columns (16) and (17) of Table-3, gives a clear idea that octroi plays a relatively much smaller role in the combined revenue of the five KAVAL towns Corporations. This, however, is

mainly on account of insignificant role of octroi duty in the finances of the three Corporations of Kanpur, Agra and Lucknow, that have replaced octroi with terminal tax and terminal toll and levy this duty only on animals brought for slaughter. This is substantiated by a comparison of figures in columns, (2), (4), (6) of Table-3 with those in columns (7) of Table-1 and those of columns (3), (5) and (7) of Table-3 with those of columns (8) in Table-1 which show that the contribution of octroi revenue to both the total tax revenues and total incomes

has always been higher in the cases of Varanasi and Allahabad Corporations which have continued to levy octroi duty on all goods and have not replaced it with terminal tax and terminal toll. As between Varanasi and Allahabad (Columns 2, 3, 4, and 5 of Table-3) the relative importance of octroi duty as a source of finance has always been higher in the former. It is also significant to note that while the decline in the percentage of octroi receipt to tax revenue is about the same in both the cases, the percentage of octroi revenue to total incomes shows a much higher decline in the case of Varanasi Corporation.

Commodity-wise Break up of octroi
Revenue

The

Commodity wise break up of octrio receipt in Varansi and Allahabad Corporations shows that in the case of both of them the highest proportion of income comes from the levy on food articles, (class I) followed by cloth (Class VIII)and metal goods (class VIII). It is, however, interesting to note that the relative contribution of octroi on food grains shows a fall in the case of Allahabad, while it has increased slightly in Varanasi. revenue from octroi duty on metal goods, on the other hand, shows a rising tendency. The change in the relative share of octroi revenue from each category of goods may either be due to change in rates of duty of the change in the incoming quantity of goods. Since details about these are not available, we cannot precisely explain these year to year variations. We may, however, partly explain the increased contribution of octroi duty on metals in terms of increased demand for these as a result of the setting up

Year

% to tax Rev.

% to tax Rev.

% to tax Rev.

% to Tax Rev.

% to Tax Rev.

% to Tax Rev.

% to Tax Rev.

% to Tax Rev.

1950-51 68.59 51.1 55.65 26.6 63.21 40.97 1955-56 68.43 25.5 56.44 24.9 62.60 42.49 1960-61 61.87 22.7 48.16 22.8 55.57 30.19 1961-62 60.54 29.1 49.86 21.2 55.74 33.89 1962-63 61,96 28.6 45.69 20.6 54.69 32.99 1963-64 63.50 27.0 50.43 25.9 57.80 35.04 1964-65 62.60 27.9 49.81 19.4 57.01 31.09 0.99 0.25 1.99

of a number of small scale industries in these cities and their nearabout. Similarly, the increase in the percentage of duty on cloth after 1955-56 in the case of Varanasi may be attributed, to some extent, to increased demand for cloth.

Per Capita Incidence of Octroi Duty

A comparison of per capita incidence of octroi with that of total municipal taxes over 1950-65 (Table-5) reveals a marked similarity in their trends-there being a continuous rise in both of them during the entire period of

study except in 1960-61 when the per capita receipts from octroi declined in both the Corporations. The same declining tendency is again visible in the case of Allahabad Corporation in 1963-64. The per capita rise is, however, much more pronounced in the case of Varanasi in per capita incidence of both of total municipal taxes and of octroi duty. It is also significant that the percentage increase in per capita burden is much greater in the case of total municipal taxes than that of octroi duty in the case of both these Corporations. This shows that both these

tions for respective years).