Octroi rules are so obtuse that often authorities themselves are not sure how to implement these for various IT products. Octroi should be abolished forthwith and the state government should collect additional sales tax which it should
allocate to cities on a pro-rata basis.

Channel partners in Gujurat are going through a lot of trouble due to octroi duty. As a channel partner and president of a traders’ association, I have gone through enough octroi problems.

WASTE OF TIME AND MONEY
One facet of the octroi menace is that it demands productive time from partners. When the material is delivered from a delivery godown outside octroi limit to the customer in the state where octroi is levied, at least one hour is wasted per invoice.

Many times, the invoices presented by us are not accepted by authorities and are challenged. Original purchase invoices are asked, which further delays the process and exposes our pricing details as well as profits. In such cases, a temporary receipt is given. This means we have to go to the octroi office within a month to settle the issue.

Normally a consultant is hired to settle the claims, which saves us the hassle of wasting time at the octroi office. But at the same time, it burdens us with additional cost, because we are charged at least Rs 150 per invoice. If one forgets the settlement, we get court summons in one or two years, which means hiring consultants again for Rs 500 per case.

Octroi delivers a deadly blow on products that have been bought back which attract octroi on the full value of the product. This despite the fact that octroi on the entire amount had been paid at an earlier juncture. For example, if a new PC worth Rs 50,000 has been bought back for Rs 10,000, the octroi is being charged on Rs 50,000.

AUTHORITIES ARE IGNORANT
The duty structures for different products are confusing and often authorities themselves are not aware of these. A case in point is the UPS which attracts higher duty than a fax machine!

If a customer places an order for both these products, you will have one invoice for it. But you will be charged higher duty rate for both and your customer will refuse to pay the extra charge.

There have been cases when lower duty was charged knowingly and then challenged within five minutes at the same octroi post. The vigilance department is then called and the car is forced to park at the octroi station for a few days. Incidents of this nature have occured in the past and can be proven.

THREATS AND PENALIZATION
In spite of requests to authorities to charge the differential amount in octroi, vigilance department officials often visit the dealer’s office to check all records under the pretext of "sthala tapas" (on the spot inspection).

This usually takes a week and the dealer’s staff has to help the authorities, besides doing their normal work. You are treated like a criminal though you have done nothing wrong and penalized with a sum abruptly. According to the authorities, the fine charged is eleven times the octroi avoided!

Authorities give a receipt for the amount. But the receipt does not mention anything about charging eleven times the octroi payable. It just says amount and octroi at correct charges!

Even though there are so many anamolies involved in octroi fines, dealers shell out the money because they are threatened that they will be served a legal notice. This entails carrying all sales records to the octroi office for months, during business hours.

Another reason why dealers go through these irrational practices is that all past records are considered to be sealed on the day the penalty payment is made. In fact, most dealers prefer to "invite" octroi officers every alternate year to get their records sealed once and for all.

WARRANTY REPLACEMENTS AND OCTROI
Octroi problems are compounded when products are warranty replacements or repaired ones coming from outside the state. Octroi is levied even on replacements and dealers are asked to pay and then claim refund. Which again calls for the service of a consultant to avoid running from pillar to post.

As a result, customer service suffers. Vendors give replacements only outside octroi limit. Who will bear the duty for these products? Let us consider the case of a 17"/19" color monitor costing Rs 10,000. The duty on this product comes to Rs 250, which is more than the profit margin that a dealer earns!

Non-warranty products that have been repaired also face the same problem. At times it is better to give a new box rather than repair the old.

DISTRIBUTION SUFFERS
Normally material is stocked in a godown outside the octroi limit. It is then dispatched to other cities by road transport only. You cannot send by courier, through train or carry personally because you again end up paying octroi.

While tranporting through road, long journeys have to be undertaken, even if there are shorter routes, because these fall within city limits. Though the facility of "M" form is available to escape this problem, it is very time consuming and incurs another overhead. Also, if you receive goods by air, you have to pay octroi or use "M" form because the airport falls within the octroi limit.

Often vendors send demo products for display in shops or at exhibitions, but octroi is charged on these too. Though You can claim refund, the cost of claims is high. You can ask for exemption, but that will entail another bout of endless rounds of the octroi office.

To receive permission to get these items into the city without paying duty, you have to approach the octroi office months in advance or have good relations with the relevant officers. And despite going to such lengths, octroi raids are conducted at the exhibitions or business premises.

ARCHAIC RULES
All these archaic and unnecessary rules and regulations have made octroi the hated concept in channel business. This torturous procedure can be avoided simply by collecting more sales tax and allocating this additional amount to cities on a pro-rata basis.

The nuisance called octroi, lays only additional burden on business people and wastes their time and money. All distributors and dealers have to have two locations in each city, adding further to the overall operational cost. And, most importantly, the customer too suffers, because partners cannot provide proper service.