Know More about LBT---
Local Body Tax, popularly known by its abbreviation as LBT, is the tax imposed by the local civic bodies of India on
the entry of goods into a local area for consumption, use or sale therein.
The tax is imposed based on the point 52 of the State list from the Schedule VII of the Contitution of India which
reads; "Taxes on the entry of goods into a local area for consumption, use
or sale therein. The tax is to be paid by the trader to the civic bodies and
the rules and regulations of these vary from state to state within India.
1.What is Local Body Tax?
-> Local Body Tax is a tax on entry of goods within municipal limits.LBT has been introduced in place of Octroi. LBT was already operational in the city of Nanded,Aurangabad, Kolhapur, Jalgaon etc.Starting 1 April 2013 it has been introduced in Pune, Pimpri- Chinchwad, Thane, New Mumbai, Nagpur, etc. LBT would be introduced in Mumbai in the next phase. LBT is governed by provisions of Maharashtra Municipal Corporation Act, 1949 (the Act) and Bombay Provincial Municipal Corporation (Local Body Tax) Rules, 2010 (LBT Rules).
2.Who is liable to pay LBT?
-> Any dealer who brings goods into city limits for use,consumption or sale therein is liable to pay LBT. The term ‘dealer’ has been defined in the Act.
3. What is the taxable event under LBT?
-> Entry of goods in the city limits for use, consumption or sale therein is the taxable event under LBT.
4. What are the rates of LBT?
• address of the business place;
4. What are the rates of LBT?
-> Rates of LBT are
given in Schedule A and vary from city to city.
For example, in Pune the rates of LBT range between
0.1 percent to 8 percent; though the rate in case
of most of the products is 4 percent. Schedule
B, provides list of goods which are exempt from
LBT like cereals, specified food products, specified textile
items like khadi, etc. Schedule B is common among
all the cities where LBT is applicable.
5. What are the
registration requirements under LBT?
-> All
dealers whose turnover of sales / purchases exceeds the
threshold limit need to obtain registration.
Threshold
limit for this purpose are as follows:
It may
be noted that the aforesaid limits have been sought t o be revised by draft
amendment notification issued on 25 April 2013. Further, every person
liable to obtain registration is required to make an
application for registration in Form A.
Every
dealer who is registered in terms of Maharashtra Value
Added Tax Act, 2002 on appointed day is deemed to be registered for the
purposes of LBT.
6. Would a person selling
goods from outside a local area require
to register?
-> If a person sells
goods from outside city limits then the recipient of the
goods in the city would be liable to obtain registration if he
satisfies the criteria for liability and registration.
7.
On what value LBT is payable?
-> The LBT regulation
does not explicitly provide for value which LBT is required
to be paid. Rule 24 provides for
determination of tariff value by the Commissioner in case
of certain goods.
Whereas, Rule 25
states that the Commissioner may determine the fair
market price of goods if there are reasons to believe
that sale price/ purchase price is less than the fair market
value, in the specified different scenarios.
On perusal of
aforesaid provision it appears that LBT is required to be paid
on the invoice price charged in a particular
transaction. However, there are no explicit provisions in this
regard and this requires clarification from the authorities.
8. What are the due dates
for paying LBT? What
is the mode of payment?
-> LBT is payable on a
monthly basis and should be paid within 10 days
of the following month. The
banks in which payment can be made and challan for payment of LBT is
notified by each municipal corporation
levying LBT.
9. If the seller –
importer does not pay LBT,will the purchaser
be liable?
-> LBT is tax on entry
of goods within city limits.Therefore,
primary responsibility of paying LBT vests with the
dealer who brings goods into municipal limits. Therefore, it would
be the responsibility of seller importer
to discharge LBT in respect of goods he brought in the city
limits for sale. If however, a person other
than a registered dealer imports goods into the city
limits and thereafter sells such goods to a registered
dealer, then such registered dealer shall be liable
to discharge LBT unless it is proved that these goods
have already suffered LBT in that city.
10.
Does a seller need to mention LBT registration number
on the Invoice?
-> In terms
of Rule 21 and 22 of the LBT Rules, every bill /
invoice / cash memo issued by the selling dealer should contain the
following:
• full
name and style of the business• address of the business place;
•
LBT registration certificate number;
•
particulars of the goods sold and the sale on
price thereof; and
•
a certificate containing the following declaration:
DOCUMENTS REQUIRED FOR REGISTRATION UNDER LBT
self attested photo copies of the following documents (if applicable) Documents marked as (*) are mandatory.
* Income Tax PAN Card
* Shop Act Registration Certificate
* Two passport size photographs of applicant
One passport size photo of each partner(s) / director(s) etc. (if applicable)
Registration Certificate under Maharashtra Value Added Tax [VAT/TIN]
Property Tax Demand Notice / latest tax paid receipt (Nashik Municipal Corporation)
Partnership Deed (Applicable for Partnership Firms Only)
HUF Declaration in affidavit format (if applicable)
Company Registration Certificate – For Ltd./Pvt Limited Companies
(Incorporation Certificate, MoA & Article of Association)
List of Board of Directors (If attached separately)
List of Partners (If attached separately)
Registration Certificate issued by Charitable Trust (Applicable for Trust)
Intimation of Nomination / Declaration of Name of Manager
Octroi raj ends, Local body tax regime begins..
How will the transition will take place?
LBT is a tax that traders will
pay the local civic body for importing
goods into the city.
Sounds similar to octroi? Well Yes! Octroi, abolished in almost all
municipalities in state, is paid every time a consignment enters the city, at
octroi nakas. LBT attempts to speed up goods movement, stressing
self-declaration of goods by traders who will maintain LBT accounts.
Octroi is the fifth highest revenue spinner for the BMC - the collection for 2012-13 has been pegged at Rs 7,200 crore. "The BMC wants to ensure it does not lose out on the revenue it generates through octroi”. LBT is an account-based system where traders and businessmen will pay the tax monthly by way of self-declaration. This tax must be paid directly to the municipal body.
Octroi is the fifth highest revenue spinner for the BMC - the collection for 2012-13 has been pegged at Rs 7,200 crore. "The BMC wants to ensure it does not lose out on the revenue it generates through octroi”. LBT is an account-based system where traders and businessmen will pay the tax monthly by way of self-declaration. This tax must be paid directly to the municipal body.
The major transition
would be that, the tax collection will be done on a monthly basis unlike
in octroi, where it is a daily affair.
Who are the REBELS? |
With
effect from 2013, octroi will be abolished and LBT will be operational.
Provisions relating to LBT are covered under ‘The Bombay Provincial Municipal
Corporations (Local Body Tax) Rules, 2010. Such rules are part of the act
called ‘The Maharashtra Municipal Corporations Act, 1949’, in short, The
MMC Act, 1949.
Under
this LBT it will be applicable for the every dealer who purchases and
goods for sale, purchase, Consumes or for its own use.
A]
TRADERS
As LBT
is an UMBRELLA TAX, a lot of its rules and regulations will remain common
across corporations. As part of the newly proposed tax, traders and shopkeepers
will have to register with BMC and will be subjected to frequent checks. They
also have to maintain paperwork and face police intervention from time to time.
Traders
have two key objections to LBT:
· First, they
do not want the responsibility of computing their own tax liability
because that would mean additional expenses for them.
· Second, they
say they are already pay Value Added Tax, or VAT, and LBT will expose them to
the perils of double taxation.
B] END-CONSUMERS
The
question here arises is that why are the they protesting if LBT is merely
replacing octroi?
The
traders’ contention is that octroi abolition and imposition of LBT
simultaneously is a betrayal. With VAT in place across the country, a
double-tax regime is not acceptable, they say. Prices of goods are affected by
VAT as well as by state or municipality-level taxes.
Also, complying with
various rules on self-declaration, record maintenance, account books, etc could
be an added cost under the LBT regime.
These Compliance under LBT, undoubtedly are a headache for Traders but theAdded Cost is the ultimate concern for End-Consumers. With LBT replacing Octroi the prices for goods will shoot sky-high with the inflation in place in addition this current economic policies of the government.
These Compliance under LBT, undoubtedly are a headache for Traders but theAdded Cost is the ultimate concern for End-Consumers. With LBT replacing Octroi the prices for goods will shoot sky-high with the inflation in place in addition this current economic policies of the government.
The traders in Maharashtra held their contention and started an
indefinite strike on April 22, 2013 against State government in Maharashtra to
protest its decisions to impose a local body tax in the state.Traders think that the tax is a monster. Under LBT,
the onus to assess, compute and pay local tax will be on them. The relief is
that octroi will be history and their wagons carrying goods will not be
inspected at check posts.
LBT was imposed from April 1 this year in Kolhapur,
Pimpri-Chinchwad, Solapur, Vasai-Virar municipal areas. It will come into
effect in Mumbai from October 1.
The traders here took out a march from their offices in South Mumbai's
Carnac Bunder area to Azad Maidan to discuss the issues with Chief Minister on
April 22, 2013.
On April 24, traders held a car rally from central Mumbai's
Shivaji Park to Azad Maidan while for April 26 they have planned a bigger
march, having representatives traders from across the state.
The shops were closed for almost many days in a row across various
places in the state and to the relief of the consumers the strike was called
off today. However, the protesters will continue to protest by 'non-compliance'
by not registering under LBT.
"The strike was called off because the traders received requests
from retailers and consumers due to festival period of Akshaya Tritiya.
Conclusion
It
is about time that this silly prehistoric dinosaur tax is being abolished. Of
course, local bodies are well within their right to generate revenues, but the
questions that everyone has in mind is "Will LBT reduce corruption
or will end-up being in parallel lines with Octroi which only generated
corruption and hardly any income to the coffers of the local bodies."
|
I
do hope that outmoded tax models get replaced with the more transparent tax
models in our system and the answers to our questions are well answered.
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