Friday, November 21, 2014

LBT to Stay till GST is implemented

The BJP in Maharashtra had declared before the assembly elections in the state that Local Body Tax or LBT would be removed if they came to power in the state, however now it's clear that despite ·the BJP taking charge of the government it will not be removed. State finance minister Sudhir Mungantiwar said on Thursday that LBT will stay in Maharashtra till General Goods and Services Tax (GST) regime is introduced by the Centre. Traders in Maharashtra had launched several agitations against the Congress-NCP government in the state in the last one or two years to oppose LBT and specially the system of the collection of this tax.

In an earlier post, had already predicted that without GST, it will be difficult to withdraw LBT as govt needs to have a plan to generate revenue from other sources to compensate revenue loss from LBT withdrawal.

Traders even shut down markets and wholesale trades in major cities of the state on several occasions while opposing the LBT. As this became a political issue in the state, the BJP had promised traders associations that if it comes to power, LBT would be withdrawn.But the new BJP government in the state has now announced that the tax will stay at least till GST is introduced which is likely to happen in 2016.

To understand the reason for this, read - Understanding Revenue Neutrality. 

''We have to replace the revenue that the Local Municipal Bodies are currently generating through LBT with some other source and unless that happens we would not be able to remove LBT. Our attempt is to give some relief to the
traders but how and when it can happen is not known right now," Sudhir Mungantiwar said on Thursday. NCP leader and Former Deputy CM of Maharashtra Ajit Pawar, who also held the Finance portfolio during the Congress-NCP regime, said, ''The BJP must come clean on this issue. They had promised the people of Maharashtra that they would remove road-toll and they would also remove LBT. Now they must tell us why they have not done either of these things.''