Suggestions for LBT Changes

The following are the Suggestions for changes in LBT Law

1. The implementation of LBT should be given to VAT authorities. All the provisions of MVAT should be made applicable to LBT. By this, assessment by two authorities will be avoided.
2. For proper implementation of LBT, there should be a district level committee of trading Organizations, Tax Associations and consumer bodies under the chairmanship of Commissioner who should discuss to solve the common problems of traders, once in a month.
3. The Rules are not properly worded. There is wide scope for discretion and interpretation.  Rates of LBT should be same in all Corporations. A State level committee should be formed to study the anomalies in the LBT Rules.
4. One full day workshop of officers & traders to be arranged by the Commissioner for smooth implementation of LBT. Majority of the litigation have started due to lack of knowledge and misinterpretation.
5. Details of Act, Rule, Schedule A (taxable goods), Schedule B (Tax free goods), Circulars, Internal Guidelines & decisions in appeal to be displayed on website. (Sec.152Q)
6. The scheduled goods needs a serious and practical relook; otherwise there will be huge number of applications for D.D.Q.’s. There should be time limit for disposal of D.D.Q’s. (R.31)
7. This tax should also be subsumed in G.S.T.
8. FAQ should be published by Corporation by inviting questions from traders, practitioners & consumers.
9. Check Posts must be removed.
10. The registration limit should be Rs. 5 lakhs as available under MVAT Act. Dealers who are not importing any goods should be exempt from registration. e.g. dealers dealing in tax free goods, professionals, etc. (Sec. 152B, R.3)
11. A proper check on U.R.D. dealers should be kept instead of harassing the registered dealers.
12. No LBT should be levied on the professionals like doctors, engineers, architects, advocates, chartered accountants, tax consultants etc. as basically they cannot be called dealers doing business. Reference can be taken of the following decisions –
13. Bombay High Court in A.F. Ferguson & Co vs. State of Maharashtra W.P. No. 1232 of 1995 on 5-5-2006 had categorically decided that the office of Chartered Accountant was not a “business and commercial establishment”. The Court struck down as unconstitutional sections of the Bombay Shops and & Establishment Act that included CAs within the definition of commercial establishment. Similar findings were recorded by the Bombay High Court in the case of B. G. Sabne in W.P. No. 1256 of 1992 on 12-9-2006. Chartered Accountants were thus declared by the jurisdictional High Court as “learned professionals” on the same footing as the three traditional professions - church, medicine and law. 
14. As per sec. 152G if a registered dealer sales goods to another registered dealer or to any other person exceeding Rs. 10, invoice has to be issued. This price limit should be enhanced upto Rs. 500/-
15. The administrative system should work in such a way that it should not be a golden opportunity to tax evaders due to removal of check post.
16. There is exception under the definition of the dealer which is under –
17. Any individuals who imports goods for his exclusive consumption or use and a department of State & Central Government not engaged in business shall not be a dealer.
18. Above exception is not usually published and also not implemented by the Corporation. The individuals like students, house wives, Government employees and employees in private firms are not liable to pay LBT if they import any goods of any amount, since they are neither dealers nor doing any business.
19. Similarly if any dealer imports any building material for his residence or if he imports any vehicle for his personal use, he is not liable to pay LBT. (Sec.2 [16A])
20. Clear provisions for right to claim set-off in the returns should be made. Set off should be allowed on proportionate or ratio method if exports are made out of mixed local and imported purchases.[R. 32(2)(a)]
21. As per R.28 (5) the deduction for rejection of goods is allowed in case of export. But the same type of deduction is not available if the rejection is made out of imports.
22. List of processing to be increased so as to cover various activities. Commissioner has power to include the required processes from time to time. Meaning of “no change in any condition or appearance of the goods” should be cleared.(R.28)
23. The rates, quantum of interest & penalties are exorbitant, which gives wide scope for corruption. (R.48(3), R.48(1&2), R.49, Sec. 152L)
24. There will be litigations on ‘Value of the Articles’, ‘Purchase Price’, ‘fair market value’, and ‘tariff value’, ‘discounts’ and ‘debit/credit notes’, due to lack of clarity, wide discretion and untrained staff. (Sec. 2(70C), R. 24 & 25)
25. Procedure of refund is too clumsy. Hardly any chances of getting refunds as under MVAT Act. The condition of import for the purpose of export as well as to disclose the import for the purpose of export in the return after purchase is to be deleted. Interest @ 1% p.m. has to be given on refund.(R.32)
26. Why permission of Commissioner is required to pay 10% differential tax who is exporter on regular basis? What is the meaning of ‘regular basic?’ As per my information, no Commissioner has given such permission till today.(R.32)
27. The returns in Form E-I and E- II are complicated. Those have to be simplified. The time limit for revised return is before the expiry of one month from the date prescribed for original return. But it should be on the lines of MVAT Rules. (R. 29)
28. Instead of monthly payment for everybody, it should be on the basis of MVAT Rules. (R. 40)
29. There seems to be provision like purchase tax under BST Act if purchases are from URD. But this is not correct. Purchases from URD are basically linked with import by URD. So it is difficult to prove for the buyer (R.D.) that registered dealer who is his vendor has not imported the goods. If a goldsmith purchases old ornaments from a customer and obtains a letter from the customer that he has not imported the ornaments, the goldsmith will not be liable to pay LBT. (S.152D)
30. A circular should be issued mentioning therein that no LBT is leviable simply because office and billing is from inside LBT area but goods have never entered in LBT area. Those are purchased and sold out of LBT area.
31. Filing appeal in High Court after making full payment is not affordable. There must be provision of appeal before Tribunal. Also provision of part payment before appeal should be made.(Sec. 406 & R.36 to 38)
32. A lot of problems may arise in case of builders and contractors as provisions and composition scheme is not clear. Detail working has to be made before selecting any method. For one project of the builder, five times LBT is charged or levied directly or indirectly. First 1% surcharge at the time of purchase of plot as per Sec. 149(A). Secondly on the basis of sq. mtrs on construction area if he opts for composition as per R. 27(4). Thirdly his sub contractor or any dealer or person undertaking any work will pay 0.25% of total amount of contract value if he opts for composition as per R. 27(5). Fourthly contractor’s suppliers or vendors will be including LBT if goods are purchased within the LBT area. Lastly again on the sale of shops or flats as per Sec. 149(A). This entire multiple taxation is exorbitant for which special provision of set-off is required.
33. As per R. 27(4) the contractor who opts for lump sum payment of tax may make the payment of LBT in advance to the extent of 50% of such amount of due, on applying for grant of commencement certificate for such construction. But there is no provision about the time for balance payment. Similarly if any building is partly constructed on the date of implementation of LBT, there is no provision about the method of payment for non constructed area. According to me architect certificate should be accepted.  
34. There seems to be no provision for refund if the quantum of the work reduced finally or if the work of construction is cancelled after the payment of 50% lump sum amount.
35. There are various provisions which are incorporated directly under the rules instead of providing under the Act. These provisions can be challenged as ultra vires.  

This Article is contributed by Kishor Lulla