MANAGEMENT OF URBAN LOCAL FINANCES: Study of Non-Octroi States

Octroi is a tax on entry of goods into a local jurisdiction for sale, consumption or use. Under the Indian Constitution, the power to levy octroi rests with the states. Though condemned almost universally as an obnoxious impost, octroi continues to be an important revenue source for local governments.
Abolition of octroi has been recommended by almost all expert panels and committees which have gone into the question of its continuance. In this context, this study looks into the various aspects: (i) whether non-octroi states have exhibited greater dependence on state fiscal transfers, (ii) whether they have undertaken additional resource mobilization measures at the local level, (iii) whether entry tax has yielded requisite amount of revenue to compensate for the loss of octroi revenue, and (iv) whether revenue and expenditure levels in non-octroi states have allowed municipal service levels to deteriorate.