Chandigarh, November 4
The Punjab Government appears to have narrowed down to gross turnover (GTO) tax under value added tax (VAT) as a source of revenue for compensating civic bodies for abolishing octroi.
Although the Chief Minister, Capt Amarinder Singh, announced in Malerkotla today that octroi would be abolished by the end of March next year, sources in the government revealed that of four options under consideration to find an alternative source of revenue, there was near-unanimity on tax on the GTO under VAT.
Some top financial and taxation experts, too, were in favour of tax on the GTO.
Although the recommendation is still to go to the Council of Ministers, the consensus is against the other options, including the levying of entry tax, as is being done in some states. The option of levying local area development (LAD) tax was considered too cumbersome.
The abolition of octroi has been hanging fire for a long time. The previous Shiromani Akali Dal-Bharatiya Janata Party (SAD-BJP) government had, at the fag end of its tenure, announced the abolition of octroi. This was, however, challenged in the Punjab and Haryana High Court. And the decision has been frozen since then.
The main problem facing the government has been the funding of the civic bodies for which the major source of income is octroi. But with the introduction of VAT, various local taxes, including octroi, have to go.
The government has to look for means to generate enough funds for the civic bodies to sustain these and
provide the mandatory services, including the maintenance of basic amenities.Although the quantum of tax on the GTO is to be decided, the sources revealed that it would be just enough to compensate the civic bodies to the extent of the annual collection of octroi. There are civic bodies which have substantial income from octroi.
Under the new regime the distribution of income generated through the proposed tax on the GTO under VAT will be in proportion to the tax turnover of the particular civic body.
The sources revealed that the proposal would be presented to the Council of Ministers after certain basic and preliminary modalities had been worked out. By April 1 next year, they maintained, there would be no octroi in Punjab.
