Inland Customs Line - Abandonment

Abandonment

Several British viceroys considered dismantling the line, as it was a major obstacle to free travel and trade across the subcontinent. This was partly due to the use of the line for the collection of taxes on sugar (which made up 10 percent of the revenues) as well as salt, meaning that traffic had to be stopped and searched in both directions. In addition the line had created a confusing number of different customs jurisdictions in the area surrounding it. The viceroys were also displeased with the corruption and bribery which was present in the Inland Customs system, and the way the line came to serve as a symbol of unjust taxes (parts were set on fire during the Indian Mutiny of 1857). However, the government could not afford to lose the revenue generated by the line and hence, before they could abolish it, needed to take control of all salt production in India, so that tax could be applied at the point of manufacture.

The Viceroy from 1869 to 1872, Lord Mayo, took the first steps towards abolition of the line, instructing British officials to negotiate agreements with the rulers of princely states to take control of salt production. The process was speeded up by Mayo's successor, Lord Northbrook, and by the loss of revenue caused by the Great Famine of 1876–78 that reduced the land tax and killed 6.5 million people. Having secured salt production, British India's Finance Minister, Sir John Strachey, led a review of the tax system and his recommendations, implemented by Viceroy Lord Lytton, resulted in the increase of the salt tax in Madras, Bombay and northern India to 2.5 rupees per maund and a reduction in Bengal to 2.9 rupees. This reduced difference in tax between neighbouring territories made smuggling uneconomical and allowed for the abandonment of the Inland Customs Line on 1 April 1879. Strachey's tax reforms continued, and he brought an end to import duties and almost complete free trade to India by 1880. In 1882 Viceroy Lord Ripon finally standardised the salt tax across most of India at a rate of two rupees per maund. However the trans-Indus districts of India continued to be taxed at eight annas (½ rupee) per maund until 23 July 1896 and Burma maintained its reduced rate of just three annas. The equalisation of tax cost the government 1.2 million rupees of lost revenue.