The state government is not giving Ludhiana Municipal Corporation (LMC) its full share vis-a-vis VAT surcharge.

Despite a three-fold increase in the value-added tax (VAT) collections in the past seven years from about Rs. 5,000 crore to Rs. 15,000 crore in Punjab, the state government has not been releasing the VAT share proportionately to the LMC.

At the time of abolition of octroi (chungi) in September 2006, it was proposed that the state government would provide money from the VAT collections (in the form of municipal fund) to the councils in lieu of the octroi.

As per the rules, a civic body was supposed to get 10% of the VAT surcharge collected from sale of different commodities within its limits.

Calculations suggest that since the VAT collections from Ludhiana has increased to `6000 crores (maximum in the state with highest percentage of increase), as per civic body's share it is supposed to get around Rs. 600 crore.

But, the civic body is getting only Rs. 300 crore and it has not been increased in proportion to the VAT collection.

According to figures obtained from finance department of the LMC, the civic body used to collect around Rs. 250 crore through octroi at the entry points of the city.

"When octroi was replaced, government had promised that the civic body would get more than what it was collecting through octroi. The state government, however, didn't keep its words and the development of the city is badly hit,"said Federation of Associations of Small Industries in India (FASII) president Badish Jindal. Jindal even raised the issue with the mayor and the deputy commissioner Ludhiana.

Ludhiana East MLA, Bharat Bhushan Ashu, who had obtained the information under the Right to Service Act (RTI), stated that VAT collections in Ludhiana had gone up by 72% since 2006.
"But Ludhiana's share has not been increased accordingly. The monthly VAT share of Rs. 25 crore that the civic body is getting from the state government gets delayed many a times, creating problems for the civic body,"said Ashu.

He alleged the SAD government was biased against Ludhiana and had been exploiting city's industrialist status to carry out development in other towns, where VAT collection is very low.

Out of around Rs. 17,000 crore collected from VAT as per figures, Ludhiana contributes Rs. 5,500-6,000 crore per annum.

Mayor Harcharan Singh Gohalwaria admitted that the city was getting VAT surcharge less than its share. "We have already raised the matter with the state government and in future as well, we are planning to discuss the issue with the deputy chief minister Sukhbir Badal and the local bodies minister," he said.