Saturday, April 20, 2013

LBT on outside area purchases

Question :

Will I be liable to pay LBT on goods purchased from outside the LBT area (i.e Thane) but goods have not entered the LBT Area?
Example - I purchased goods from say Shahapur (Which is not in LBT Area) and my office is located in Thane (Which is in LBT Area) but goods are not entering thane, they are directly sent to say Bangalore (Which is again not a LBT Area). So, Will I be liable to pay LBT?

Simple Answer
No, Not required to pay
(But this is debatable)

Details and Explanation :
There are two views on this question.

My View - 
As LBT is payable on goods imported in Thane, so if no goods imported then no need to pay. Even if department takes a contradictory view and says these are taxable then it is out of purview of taxation.
The onus of proving the goods did not entered thane will be on assessee and so I would recommend that all proper records are kept there are delivery chalans and address of buyer to whom you are sending these goods.

Other View -
According to this view you will have to pay 10% of LBT on such purchases. This view is taken from the Rule 32 i.e refund of LBT in case of export.
The proviso to rule says as follows:-

Commissioner may allow any dealer who is importing and exporting  the goods listed in Schedule A, on a regular  basis, to pay only ten per cent of the local body tax chargeable,  after  obtaining from such dealer a declaration  that  the goods are to be exported within  the specified period.

But according to me this is for the goods which have already entered i.e. imported in Thane and then they are exported.

What are your interpretation on this question? Please post it in comments below. Let's have a discussion on what is correct interpretation in comments below.