Local body Taxation (LBT) in India

1. TECHNICAL SESSION III – STATE LAWS
TOPIC – LOCAL BODY TAX (LBT)
STATE LEVEL CONFERENCE FOR CA STUDENTS 2013, AURANGABAD

2. LOCAL BODY TAX (LBT)
PRESENTED BY : SAURABH TOSHNIWAL

5. PRESENTATION
CONTENTS
Life Before LBT : Octroi Raj
Bye Bye Octroi, Hello LBT!
Who all are Covered under LBT ?
What are the Compliances ?
Why are the Traders in discontent ?
My Opinion

6. LIFE BEFORE LBT
- OCTROI RAJ

7. THE OCTROI RAJ
Octroi was the main source of revenue of
Municipal Corporations in Maharashtra.
Forcible collection of Octroi at the check post
The presence of any provision of Law is always
absent at the check post
No Octroi practitioner or consultant could legally
fight against the malpractices in Octroi
department

8. ABOLITION OF OCTROI
Heavy corruption on one side, leakage in Octroi on
the other
Demand from a class of traders to abolish the Octroi
Political Unwillingness
Result - Octroi was still present in many
Corporations

9. BYE BYE OCTROI,
HELLO LBT !

10. SOURCE OF LBT LAW
Sub section (1) of Section 152T of the Bombay
Provincial Municipal Corporation Act, 1949
Introduction of “Bombay Provincial Municipal
Corporations (Local Body Tax) Rules, 2010”
Concerned Sections - sec. 152 A to sec. 152 O in
chapter XI– A and sec 152 P to sec 152 T in
chapter XI-V
Governed by Urban Development Department.
Extends only to Municipal Corporations

11. WHAT IS LBT ?
Another name of Octroi. Octroi is collected at check posts. In
LBT check posts are supposed to be removed.
Tax which can be collected by Corporations on the basis of
books of accounts like VAT.
It is a tax on purchase and not on the sale of goods.
It is a self assessment account based tax.

12. WHEN DOES LBT ARISE ?
Any goods which are brought into the
Corporation area (import) from outside
Corporation area for use, consumption or sale
are liable for LBT.
LOOPHOLE
If the goods imported are not brought in Corporation area and
directly sent to godown/office/branch and sold directly from
outside Corporation limit then LBT is not payable.

13. OTHER KEY FEATURES
Schedule A is for Taxable Goods and Schedule B is for Tax Free Goods.
Rates for Taxable Goods range from 1% to 7%. Most of the Goods are taxed
at 3%.
There are 59 Essential Commodities which are included in Schedule B.
Implementation of LBT shall lead to decrease in prices of these goods.
If goods are purchased inside Corporation area from unregistered dealer
under LBT Act, then also LBT is payable. (Section 152D)

14. GOODS & VALUE OF GOODS
• “Goods” includes animals.
Goods
Section 2(25)
• So besides the meaning of goods in common
parlance, even animals are covered.
• In brief all goods are covered.
• “Value of the Article” in relation to the goods
imported into the city, shall mean the value of
Value of the
the article as mentioned in the original invoice
Article
• include insurance, custom duties, excise duties,
Section 2(70)C
Value Added Tax (VAT), transport charges, freight
charges, and all other incidental charges.

15. IMPORTER VS DEALER
Importer
Dealer
Section 2(16A)
• “Importer” means a person who brings or causes
to be brought any goods into the limits of city
from any place outside the area of the city for
use, consumption or sale there in.
• “Dealer” means any person who whether for
commission, remuneration or otherwise imports,
buys or sells any goods in the city for the purpose
of business.

16. In the context of LBT…
IMPORT
Goods brought from area
outside the limits of
Municipal Corporation
EXPORT
Goods sent out of the
Municipal Corporation
area

17. WHO
ALL ARE
COVERED BY
LBT ?

18. APPLICABILITY
Dealers under VAT
are Deemed
Dealers and Need
Not Register
Registration
Non-Dealer
Dealer
An Importer
Not An
Importer
Temporary
Business

19. CRITERIA
An Importer
Not An Importer
• Turnover of sale or
purchases of taxable
goods during the
year, equals or
exceeds Rs.
1,00,000 /-
• Turnover of
purchases of taxable
goods equals or
exceeds Rs.
1,50,000/-
• Value of goods
imported equals or
exceeds Rs. 5,000 /in a single
transaction
• Value of goods
imported equals or
exceeds Rs. 5,000 /in a single
transaction
Temporary
Registration
• Business on a
temporary basis
• Liable for
Compulsory
Registration
irrespective of
turnover of Sales &
Purchases

20. AMMENDED CRITERIA
As per new Notification
as on 20th June, 2013
Dealer
Importer
Not an Importer
Imports of Rs.
1,00,000
Turnover of
Purchase or Sale
more than Rs.
5,00,000

21. EXEMPTIONS
PUBLIC USE
Goods
are
imported
by
State or Central
Govt.
+
Certificate
certifying
that
the goods are for
public purpose
GOODS EXPORTED
FOR PROCESSING
Exports
carrying
processes
for
out
+
Reimported
without
any
change, LBT only
on the value
added.
GOODS
IMPORTED FOR
JOB WORK
SALES RETURN
Imports
for
carrying
out
processes on job
work basis
Goods sold are
received back
due to rejection
+
+
Exported within
six months, to
same
person,
without
any
change
Received back
within a period
of six months
from export.

22. REFUND OF LBT
Where goods imported, on which LBT has been paid, are
exported by the same person by way of sale or otherwise, then
ninety percent of LBT so paid.
Imported
Paid LBT
If you are a
Regular Dealer, in Return
Details of Import
Obtain
LBT on &
Permissionsuch Import is paid
Pay only 10% within six months
Exported
Exported
File return claiming Refund
Refund
Exported without changes

23. WHAT ARE THE
COMPLIANCES ?

24. PAYMENT OF LBT
Payment has to be made on Monthly basis for all dealers
irrespective of Turnover.
Payment has to be made on or before the
10th day of month following the period to which the LBT relates to.
Payment may also be made as per the Composition Scheme.
General
Dealers
Contract Work
Builders

25. COMPOSITION SCHEMES
General Dealers
Contract Work
Builders
Turnover
Contract
Value
Contruction
Size
Turnover
LBT
0 to 1,00,000
Nil
1,00,000 to 2,00,000
4,000
2,00,000 to 3,00,000
6,000
3,00,000 to 4,00,000
8,000
4,00,000 to 5,00,000
10,000
5,00,000 to 6,00,000
Construction
LBT per
square
meter
Up to 4 floors (No lift)
Rs. 100
Rs. 150
12,000
Upton 7 floors (with
lift)
6,00,000 to 7,00,000
14,000
Above 7 floors
Rs. 200
7,00,000 to 8,00,000
16,000
8,00,000 to 9,00,000
18,000
9,00,000 to 10,00,000
20,000
0.25% of the
Contracted Value
May pay LBT, in advance to the
extent of 50%

26. DELAY IN PAYMENT
If Not paid on or before the due date
2% per month of such LBT for first 12 months after due date
and
3% per month of such LBT for each month thereafter
If any LBT is found due as a result of order of assessment,
a sum equal to 2% of such LBT for each month from after
assessment period till date of order of assessment.
Interest shall not exceed the amount of LBT due on which
such interest is charged.

27. FILING OF RETURNS
Types
Half Yearly
Return
Form E-I
Normal Method
Annual
Return
Form E-II
Composition Scheme

28. PENALTIES
Selling dealer does not • Sum not exceeding Double the
issue Invoice
amount of LBT
Failure to Register
• Sum not exceeding Ten times of
the amount of the LBT payable
Failure to Comply with
any Notice
• Sum not exceeding Rs. 10,000/-
Furnishing false
Declaration or
Certificate
• Sum not exceeding Five times the
amount of LBT

29. Late filing of Returns
Excess collection of LBT
• Rs. 5,000 for each return
• Rs. 2,000 or double the amount
of LBT, whichever is less

30. APPEALS
Appeals can be made to the Commissioner for any issues.
Appeals have to be filed in ‘Form S’
Shall be handled by Commissioner, Deputy Commissioner
or Assistant Commissioner

31. WHY ARE TRADERS
IN DISCONTENT ?

33. ISSUE #1 – INSPECTOR RAJ
MR. MOHAN GURNANI
President, Federation of Association of Maharashtra (FAM)

34. ISSUE #2 – MORE COMPLIANCES
MR. YASH ARYA
Partner, Indirect Tax, Haribhakti & Co.

35. ISSUE #3 – INCREASE VAT
Maharashtra is the only state in India that has this additional tax
All Other States in India have adjusted for Octroi charges by
increasing the existing taxes like VAT
Avoids the hassle of filing taxes every 50 days for the traders
Accountability does not shift to another body

36. ISSUE #4 – DIFFERENT RATES
LBT Rates changes with change in
Municipal Corporation.
E.g. Industrial Equipment
Nashik
Aurangabad
Navi Mumbai
2.5%
2.0%
3.5%

37. ISSUE #5 – ADMINISTRATIVE SYSTEM
MR. UDAY PIMPRIKAR
Partner, Tax & Regulatory, EY

38. ISSUE #6 – UNCLEAR PROVISIONS
Excess Collection of LBT by Dealer is an Offence under Act. LBT is
leviable on Purchases, then where does the question of Collection
comes from ?
If the opinion of Commissioner is not acceptable then Whom should
we appeal to ?
In VAT if dealer from whom Purchases are made, doesn’t pay tax, the
purchasing dealer doesn’t get set off. This way track of tax payments is
kept. How will this happen in LBT ?
Every Act has an Charging Section. Where is the Charging section for
Local Body Tax ?

39. MY OPINION

40. IN MY OPINION…
Committee of Trading Organizations
Proper check on U.R.D. dealers
Check Posts
Administrative system
Clear provisions
Anomalies in LBT Rules
Details on Website

41. CONCLUSION

42. WHAT YOU TAKE AWAY HOME FROM
THIS PRESENTATION ?
What is LBT ?
Abolition of Silly
Prehistoric
Dinosaur Tax
Do It Yourself Tax
Good Idea, Poor
Implementation

43. WHAT YOU TAKE AWAY HOME FROM
THIS PRESENTATION ?
Benefits
Disadvantages

44. WHAT YOU TAKE AWAY HOME FROM
THIS PRESENTATION ?
My Opinion
Well within Right
to Generate
Revenues
Reduce Corruption
Or end-up parallel
with Octroi ?
More Transparent
Tax Models

46. Contact me - sourabhstt@gmail.com