Put class on instead li

Question

If you use your custom Walker class, then there’s no point in using filters for adding these classes.

Let’s take a look at this part of your code:

$class_names = join( ' ', apply_filters( 'nav_menu_css_class', array_filter( $classes ), $item, $args ) );
$class_names = $class_names ? ' class="' . esc_attr( $class_names ) . '"' : '';

$id = apply_filters( 'nav_menu_item_id', 'menu-item-'. $item->ID, $item, $args );
$id = $id ? ' id="' . esc_attr( $id ) . '"' : '';

$output .= $indent . '<li' . $id . $value . $class_names .'>';

$attributes  = ! empty( $item->attr_title ) ? ' title="'  . esc_attr( $item->attr_title ) .'"' : '';
$attributes .= ! empty( $item->target )     ? ' target="' . esc_attr( $item->target     ) .'"' : '';
$attributes .= ! empty( $item->xfn )        ? ' rel="'    . esc_attr( $item->xfn        ) .'"' : '';
$attributes .= ! empty( $item->url )        ? ' href="'   . esc_attr( $item->url        ) .'"' : '';
$attributes .= ($args->has_children)        ? ' data-toggle="dropdown" data-target="#" class="dropdown-toggle"' : '';

$item_output = $args->before;
$item_output .= '<a'. $attributes .'>';

In first line you call your filter, and then you use these classes in <li> element.

The last line of that fragment is responsible for displaying <a> element.

So here’s that function with modifications (you don’t need to use nav_menu_css_class filter anymore):

function start_el( &$output, $item, $depth = 0, $args = array(), $id = 0 ) {
    $indent = ( $depth ) ? str_repeat( "\t", $depth ) : '';

    $class_names = $value="";

    $classes = empty( $item->classes ) ? array() : (array) $item->classes;
    $classes[] = 'menu-item-' . $item->ID;
    if ($args->has_children && $depth > 0) {
        $classes[] = 'dropdown-submenu';
    } else if($args->has_children && $depth === 0) {
        $classes[] = 'dropdown';
    }
    $class_names = join( ' ', apply_filters( 'nav_menu_css_class', array_filter( $classes ), $item, $args ) );
    $class_names = $class_names ? ' class="' . esc_attr( $class_names ) . '"' : '';

    $id = apply_filters( 'nav_menu_item_id', 'menu-item-'. $item->ID, $item, $args );
    $id = $id ? ' id="' . esc_attr( $id ) . '"' : '';

    $output .= $indent . '<li' . $id . $value . $class_names .'>';

    $attributes  = ! empty( $item->attr_title ) ? ' title="'  . esc_attr( $item->attr_title ) .'"' : '';
    $attributes .= ! empty( $item->target )     ? ' target="' . esc_attr( $item->target     ) .'"' : '';
    $attributes .= ! empty( $item->xfn )        ? ' rel="'    . esc_attr( $item->xfn        ) .'"' : '';
    $attributes .= ! empty( $item->url )        ? ' href="'   . esc_attr( $item->url        ) .'"' : '';
    $attributes .= ($args->has_children)        ? ' data-toggle="dropdown" data-target="#" class="dropdown-toggle"' : '';

    $a_classes = array('nav-link');
    if ( in_array('current-menu-item', $classes ) OR in_array( 'current-menu-ancestor', $classes ) ) {
        $a_classes[]  =   'active';
    }
    $attributes .= ( ! empty( $a_classes ) ) ? ' class="' . esc_attr( join( ' ', $a_classes) ) . '"' : '';

    $item_output = $args->before;
    $item_output .= '<a'. $attributes .'>';
    $item_output .= $args->link_before . apply_filters( 'the_title', $item->title, $item->ID ) . $args->link_after;
    $item_output .= ($args->has_children && $depth == 0) ? '<b class="caret"></b></a>' : '</a>';
    $item_output .= $args->after;

    $output .= apply_filters( 'walker_nav_menu_start_el', $item_output, $item, $depth, $args );
}

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