What is LBT?
- LBT stands for Local Body Tax, which has been introduced in
most of the municipalities and corporations in Maharashtra, in lieu
of Octroi or Cess.
- It
is a levy under entry 52 in the State list of Schedule VII of the Constitution
of India,
on the entry of goods into a city limits for the purpose of consumption,
use or sale therein.
- Thus,
the recent agitations against LBT, a levy, which is constitutionally
valid, have given rise to questions as to the root cause of the agitations.
Then what is OCTROI ?
- Octroi
is a levy which was prevalent in Roman times.
- It
was extensively used as a tax tool in Europe till World War II.
- Now,
it is almost extinct except in Ethiopia and Maharashtra (a true reflection
of comparable development of the economy or the situations of
drought).
- Other
states in India have done away with this levy and they share a portion of
the Value Added Tax (VAT) or Sales Tax (ST) with the local bodies.
How does LBT work?
- It works differently from the octroi system.
- Traders have to compile a list of all goods procured
within the month, feed the matter into the software provided by the civic
body to check their LBT liability.
- They have to make payment once every 40 days using
online portals, cheque, demand draft or cash through a designated bank or
counters of the civic bodies.
Significance of LBT
- LBT will be the main source of income for civic
bodies.
- It contributes between 50-70 per cent of the
actual revenues of the corporation.
- The Pune Municipal Corporation collected Rs 1314.27
crores by way of octroi for the financial year 2012-2013, while the Pimpri
Chinchwad Municipal Corporation collected Rs 1200 crores in
the last financial year.
But why
are 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.
- Government sources say tax evasion under the octroi
regime was simpler, another reason traders are opposing LBT.
Have all Maharashtra municipalities
imposed the tax?
- Out
of the 26 corporations, 24 have migrated to LBT. Mumbai and Nashik will do
so later this year.
SC verdict on LBT ?
a writ was filed by Federation of Trade Associations of Pune (FTAP) in Supreme Court (SC) against the state government decision to replace octroi with LBT.
SC refused to impose a stay on the Govt decision !!!!
Why some people call it darconian ?points
against it ?
- LBT
is a draconian Act, especially with key words like ‘goods’, ‘dealer’,
‘business’ loosely defined in the legislation, giving enough scope for the
administrators to stretch their imagination to fanciful limits to the
common man’s harassment and dismay.
- The
Bombay Provincial Municipal Corporations Act, 1949, the Act that
gives right to levy LBT, as such does not have a penalty-limit prescribed
for any violations relating to LBT, though there is an elaborate Annexure
prescribing the various penalties. That shows that penalty cannot be
levied legally.
However, the Rule 48 framed under this Act, quantifies the penalty that can be levied in different cases. Thus, the said Rule is ultra vires the Act. - Another
point against LBT is the cascading effect of teh Tax. Unlike excise or
service tax or VAT, there is no concept of set-off or input credit.
- Another
reason against LBT is that there is no time-limit that is specified for
completing the assessment of the firms. In such situations, the dealers
may be kept in suspense as to their liability to maintain books and
records.
- The
Act is not a comprehensive Act that is well worded or suited for
taxation.
A possible solution to this fiasco ????
·
They should bring in the changes in legislation to repeal LBT and
make suitable changes in VAT so that the local bodies do share revenues
the state government derives from VAT.
This will
ensure that the administration frees itself from the task of collection of
addition tax and other related administrative work. This will also help the
dealers of additional hassles of payment of tax, filing of return, surveys,
raids, check posts, assessments, appeals etc. and also dealing with one more
Government body prone to corruption.
