Centre to compensate State for loss of octroi

The Centre has agreed to compensate the loss of revenue to Maharashtra government due to the abolishment of octroi once the Goods and Services Tax (GST) comes into effect, state Finance Minister Sudhir Mungantiwar said on Sunday.

The Municipal Corporation of Greater Mumbai (MCGM) collects over Rs 7,000 crore annually from octroi. Mungantiwar, who was in Delhi to attend a three-day meet of the GST Council chaired by Union Finance Minister Arun Jaitley, said he has succeeded in convincing the Council that Maharashtra should get compensation in lieu of octroi collected by the Mumbai civic body. "We are happy that we will get compensation against octroi once the new system comes into effect that will result in abolishing of octroi in Mumbai and Local Body Tax (LBT) in other Municipal Corporations and Municipal Councils across the state," Mungantiwar said. MCGM has an average collection of octroi worth Rs 7,000 to Rs 8,000 crore and if the GST Council had disapproved it, the state government would have had to bear the burden for compensating an amount to the MCGM, equivalent to octroi collection by natural growth of some per cent every year, he said.

Maharashtra and Punjab are the two states where both LBT and octroi system are in effect. "The GST Council considered our demand and has given us big relief. The Union Finance department will make provision of compensation amount from their budget," he said.