LBT going from 1st August 2015, really?

TV screen on the day of Maharashtra State Budget announcement

Story about, will the LBT go so easily.

Update (04/08/2015) : LBT exempted for dealers how's turnover is less than 50 CR

We saw the above screen flashing every 5 minutes in almost all all news channel on the day Maharashtra State budget was read by State Finance minister. We all were happy. Specially the trader community had more reasons to celebrate than others. The post here today is about will LBT go away so easily? Will NO LBT from 1st August 2015 be a reality? If it becomes reality what will be the consequence?

Why this time the promise of abolishing LBT seems more promising than other past so many promises?

The answer lies in the place where the promise was made. The main reason behind government not being able to keep it's words for abolishing LBT was for lack of funds to substitute revenue which will be forgone by removing LBT. But, when the government sat  down for making budget, they made through calculation of from where and how the forgone revenue will come from (which we will discuss in next para in this post). Thus when the promise of "No LBT" made in budget announcement, it seemed more promising.

Effects of Abolishing LBT

The revenue loss by removing LBT will be compensated by adding a surcharge (in line with Gujrat) on VAT. In addition to increase in VAT, Property taxes, Water Tax may also be increased. The state government's move to bow down to the demands of traders and scrap the local body tax (LBT) may eventually burden people with hikes in municipal taxes such as property tax and water charges, in its bid to make up for the shortfall in revenue. The government is considering allowing municipal corporations to increase the taxes on civic services, such as water supply and sewerage system.

In his budget speech, finance minister Sudhir Mungantiwar announced that the faith-based LBT, which replaced octroi in all of the state's municipal corporations except Mumbai, would be scrapped from August 1. He added that extensive deliberations were required before enhancing the value added tax (VAT) rates, indicating that the task is yet unfinished.

The political side of LBT abolition.

When Cong-NCP alliance ruled Maharashtra, they argued that LBT cannot be abolished and included in VAT because surcharge on VAT will also be borne by villagers and people not in Municipal corporations. Logically speaking, LBT is an extra tax for enjoying facilities of living in Municipal Corporation. Hence, the logic given by then ruling party seemed logical. The same argument is gaining momentum with Chavan questioning sanctity of decision to abolish LBT. The BJP led government will also have to convince it's ally Shiv Sena, specially after their comment "Shiv Sena wants clarity on LBT abolition, more funds for Mumbai"

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Confusion Clearing : Do we still have to pay LBT?

Yesterday I attended a seminar on Changes in Taxation by Budget 2014, I was really surprised to hear a conversation between two Chartered Accountants. The surprise was more as those who were talking were CA practicing for more than a decade. [Pls don't take this as Offense to any Profession]

1st:  Have a little respite, now that we don't have to make LBT payments every month.
2nd: The payment schedule has changed?
1st : No, Didn't you heard that LBT was getting demolished?
2nd: Ya, Ya, have read in the newspaper.
1st : LBT is getting replaced by VAT from August 2014
2nd: Wow, that's great. I shall also tell my clients about this. Thanks.

My observations, Newspapers say something. We understand something. We say to others something. Then people form a completely different outlook and notion. After this, taxation department forms a even more different picture of all the tax payers.

So, this post I am writing to clear the confusion regarding LBT applicability.
Q : Is LBT gone?
A : No. LBT is still applicable and shall remain applicable unless there is notification regarding cancellation of LBT.

Q : I have heard too that from July/ August onwards we don't have to pay LBT
A : This is just rumors. LBT has to be paid even after July/ August

Q : If LBT goes, do we still have to file LBT returns?
A : Yes, even if LBT is scraped, Returns for the period will have to be filled.

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LBT on Electricity?

The standing committee members on Saturday (20th July 2014)  took a tough stand by asking the Aurangabad Municipal Corporation (AMC) to bring supply of electricity under the ambit of Local Body Tax (LBT). Terming supply of electricity as a commercial activity, the members said the power franchisee for the city "GTL Urja" should pay the tax.

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Is LBT really going?

LBT was again in news as there were speculations as it would be scrapped or at least merged with VAT. So, I have researched all the news relating to this to give viewers "One post read all news update"

So, if you have missed anything in news regarding LBT, worry not; read below to update yourself about it.

The story started with change in government at Center. With NDA getting majority seats in Maharashtra there was a clear understating as to people were fed up with existing government.

12 May 2012

'Vyapari Mitra', a city-based organization of traders, has called a meeting of all traders' associations from 26 municipal corporation areas of the state on May 14 at Pune. The traders would decide the future course of agitation against local body tax (LBT) collection demanding repealing the system.
The decision was taken at a meet in the city on Sunday. The date was conveyed to representatives of traders' associations through audio-conferencing.
Convener of the organization Ajit Mehta, said, "We will meet at the Poona Chamber of Merchants next week. We have planned to conduct video-conferencing with representatives of apex organizations and some experts. We will decide whether to resort to an agitation or any other mode of protest to compel the state to cancel LBT and octroi systems, as the latter still exists at some places."
Scource

16 May 2014

Traders from Pune, Kolhapur, Aurangabad, Nanded, Amravati, Solapur, Thane and Sangli have demanded abolition of the local body tax (LBT) from the state. The traders met on Wednesday to discuss the issue.
"The LBT is causing harassment to traders. Civic officials in many cities are undertaking unnecessary checks and conducting raids on shops as well as houses of traders. This has created fear among the traders. Hence, we want the LBT to be scrapped," said Walchand Sancheti, president of the Poona Merchants Chamber, while addressing a news conference after the meeting.

18 May 2014

The civic body's annual budget plan is all set to go haywire if the state government does scrap local body tax (LBT) ahead of assembly elections, following strong reactions against it from the trader community.
The state government fears the wrath of the trader and merchant community that has been building up against LBT might scupper its chances to bounce back to power. Civic officials fear loss of financial autonomy if LBT is indeed scrapped. 
Source

2nd June 2014

The Nagpur Municipal Corporation's (NMC) economic condition is deteriorating day-by-day ever since the implementation of local body tax (LBT).
Source

10 June 2014

Maha CM Chavan asks Mayors to suggest an alternative to LBT.
Maharashtra Chief Minister Prithviraj Chavan today asked the Mayors in the state to consult local traders on an alternative to the controversial Local Body Tax, so that the government can take a decision during the ongoing monsoon session of the Legislature.
"The government is committed to ensuring that autonomy of the civic bodies remains intact. The Mayors should tell the government whether we should revert to octroi or hand over the recovery of LBT to the sales tax department. With LBT, revenue of civic bodies increased, but there were some hiccups in the implementation of the new tax," he said. The CM however made it clear that rejection of both LBT and octroi can not be accepted. The monsoon session is to end this week.
Source

13 June 2014

NASHIK: Traders and civic officials on Thursday vehemently opposed Local Body Tax (LBT) and favoured surcharge on value added tax (VAT) with a facility for direct transfer into the accounts of the municipal corporation. This, they said, would enable the civic body to get tax revenue on daily basis.
This decision was taken at the joint meeting of city traders, industrialists and office-bearers of the Nashik Municipal Corporation (NMC) on Thursday. Following instructions from chief minister Prithviraj Chavan, city mayor Yatin Wagh had convened a meeting of traders and industrialists to discuss the issues related to the LBT and an alternative to the present tax system.
"During discussions, it was clear that there should not be LBT or octroi. But while introducing the new tax system to replace LBT, the state must ensure that it would be simple and convenient to public, traders and industrialists," Wagh said.
Source

14 June 2014

Take speedy decision on LBT, corporators urge government. Corporators and social activists on Saturday said that the state government should immediately take a decision about local body tax (LBT) as the prevailing uncertainty is causing heavy financial loss to the civic body.

Source

14 June 2014

Local leadership wants octroi to continue in Mumbai: CM. Without naming Shiv Sena and BJP, Maharashtra Chief Minister Prithviraj Chavan said today that the local “political leadership” was not interested in ushering in the Local Body Tax—which replaces octroi—in the megapolis.
The Municipal Corporation of Greater Mumbai is controlled by Shiv Sena and BJP. Speaking in the Legislative Council, Chavan said the political leadership and the commissioner of Municipal Corporation of Greater Mumbai wanted the octroi to continue, hence LBT was not introduced in the financial capital of the country.
Source

Conclusion

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Answers to Question for Study

Had posted some questions on LBT for study as to test knowledge. Here are the answers to those questions.

Answers contributed by +Kishor Lulla  

1. A has imported goods & sold goods to B who is in corporation area. B has taken the delivery of goods (or entry of the goods by B). Who is liable to pay LBT? (S.2 (31A) ).
Ans – A is liable.

2. (a). Whether software downloaded by a dealer inside corporation limit which is purchased from a dealer outside corporation limit is liable to pay LBT? (S.2 (31A)).
Ans – Yes

(b). Whether software downloaded by a dealer outside corporation limit which is purchased from a dealer outside corporation limit is liable to pay LBT? (S.2 (31A) 
Ans – No

(c). In case of above (b) if software is transferred through mail by branch outside corporation area to Head Office within Corporation area ?
Ans – Yes

(d). Whether cable operator/ cinema theatre who downloads programmes / pictures from satellite within corporation area & show them to viewers by charging specific amount, are liable to LBT?
Ans – Yes. But contrary view its quite possible. 

3. A dealer outside corporation area brings taxable goods within corporation area for keeping in cold storage for any duration. Whether the said dealer is liable to pay LBT? Whether cold storage owner is liable to pay LBT? 
Ans – No

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Questions for Study

Test your Knowledge of LBT by answering to these questions. 

1. A has imported goods & sold goods to B who is in corporation area. B has taken the delivery of goods (or entry of the goods by B). Who is liable to pay LBT? (S.2 (31A) ).

2. (a). Whether software downloaded by a dealer inside corporation limit which is purchased from a dealer outside corporation limit is liable to pay LBT? (S.2 (31A)).

(b). Whether software downloaded by a dealer outside corporation limit which is purchased from a dealer outside corporation limit is liable to pay LBT? (S.2 (31a) 

(c). In case of above (b) if software is transferred through mail by branch outside corporation area to Head Office within Corporation area ?

(d). Whether cable operator/ cinema theatre who downloads programmes / pictures from satellite within corporation area & show them to viewers by charging specific amount, are liable to LBT?

3. A dealer outside corporation area brings taxable goods within corporation area for keeping in cold storage for any duration. Whether the said dealer is liable to pay LBT? Whether cold storage owner is liable to pay LBT? 

4. A goldsmith purchases old ornaments from the unregistered person who gives in writing that the said ornaments were previously purchased within corporation area only. Whether goldsmith is liable to pay LBT? 

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LBT chared by Builder, Whether Right?

I have received many questions and queries regarding whether builders are allowed to charge extra LBT over and above the consideration for the house/ shop.

I had also explained this previously through comments on this post, but not so in detail, considering that many customers are being harassed by the builders by charging extra LBT over and above the agreement value, it become important that we all understand what is right and what is wrong.
If the builder asks you to pay LBT, take printout of this post and give it to builder. You can also translate it to any language before taking printout.

This discussion requires some maturity to think and also considers some ethics issues. So if you feel that there is no Ethics in business, then this discussion is probably not for you.

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Calculating the limit of turnover

Rule 4 – Calculating the limit of turnover for liability for registration. 

1.     For the purpose of calculating the limits of turnover for liability for registration,-

(a)  except  as otherwise  expressly  provided,  the  turnover  of all  sales or, as the  case  may  be, the turnover  of all purchases,  shall be taken into account whether such sales or purchases are of goods taxable under  the provisions of the Act and the rules or not ;

(b) the turnover shall include all sales and all purchases made by a dealer on his own account, and also on behalf of the principals mentioned in his accounts.

(c)  in the case of an auctioneer, in addition to the turnover, if any, referred to in clauses (a) and (b), the turnover shall also include the price of the goods auctioned by him for his principal, whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal if the price of such goods is received by him on behalf of the principal.

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The limits of turnover for registration

Rule 3 – The limits of turnover for registration.

1  1.  The limits for  registration shall be,-

(a)  in the case of a dealer,  who is an importer and the value of all the goods imported by him during the year is not less than Rs. 1,00,000.

(b) in any other case, including the case where a dealer has not become liable to pay local body tax under clause (a), and the turnover of all  his sales and purchases during such year, is not less than Rs. 5,00,000.

2.     Notwithstanding anything contained  in sub-rule  (1), if a dealer  or a person not carrying  on a particular  business  in   the  City on a regular  basis,  carries  on business  in the  City in any year  on a temporary  basis, then  he shall be liable for temporary  registration  under  the provisions of the Act and these rules,   whether  or not he is liable under  sub-rule (1) of this rule

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Non Dealer Registration

Question

Do I have to get registered even If I am not a dealer?

Simple Answer

Yes you will have to get registered if you are into the business or providing services i.e. a professional. This is subject to the limits. The limits are as below. 

1. Purchases or Sale (of Taxable goods) >= 5000
2. Purchases (of All goods) >= 4,00,000

But if you are purchasing the goods and importing the goods and not having any type of business or professional activities in the city then you are not liable to registration.

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Deemed Registration

Question

What is Deemed Registration?

Simple Answer

All VAT dealers registered in the municipal corporation are considered as deemed registered for LBT. The address on VAT certificate is important for considering whether the dealer is deemed registered or not. Even if main address in the certificate does not fall within the City (LBT Area) Limits, check if the additional place of business listed in VAT certificate falls or not. Thus if any address in the VAT certificate falls within the corporation limits the delar shall be considered to be deemed registered.

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LBT Rate - Nagpur 2013

Here is the Rates Schedule for Local Body Tax Calculation and Payment.

Download Nagpur LBT Rates (Mirror 1)

Update (17th July 2013): The NMC has updated the Nagpur LBT Schedule.
The Updated list Nagpur LBT Rates Here.
This notification issued on 6th July 2013

 

To know how to download the file Click here

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LBT Rate - Kalyan Dombivali 2013

Here is the Rates Schedule for Local Body Tax Calculation and Payment.

Download Kalyan Dombivali LBT Rates (Mirror 1)

To know how to download the file Click here

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