Odisha Moves to Abolish Professional Tax, Cabinet Clears Ordinance

Bhubaneswar: In a major reform aimed at easing the tax burden on individuals and businesses, the Odisha Cabinet has approved the promulgation of an Ordinance to abolish Professional Tax in the state.

The amendment to the Odisha State Tax on Professions Trades Callings and Employments Act 2000 will be brought through an Ordinance as the Legislative Assembly is not currently in session. The government has invoked Article 213 of the Constitution of India to implement the decision, signalling a significant step towards simplifying the state’s tax regime.

Introduced in 2000, the Act imposed a maximum Professional Tax of ₹2,500 annually on a wide range of taxpayers, including salaried employees, medical practitioners, consultants, agents, dealers, and various entities. Notably, even small establishments and non-profit organisations with minimal or no turnover were required to pay the maximum tax.

Despite its wide applicability, officials pointed out that the tax contributed only ₹316.97 crore in 2024–25, accounting for about 0.56 per cent of the state’s own tax revenue. They also highlighted that the administrative costs involved in assessment, collection, and enforcement were disproportionately high compared to the revenue generated.

The levy has increasingly been viewed as inconsistent with the “One Nation, One Tax, One Market” principle following the implementation of the Goods and Services Tax (GST). It has also been seen as an added compliance burden on Micro, Small and Medium Enterprises (MSMEs), start-ups, and small businesses, contrary to the state’s push for a more business-friendly environment.

With the proposed abolition, lakhs of salaried employees, professionals, and small business owners are expected to benefit from reduced compliance requirements and financial relief. The government is expected to notify further details, including the effective date and implementation modalities, after the Ordinance is formally promulgated.