Local Body Tax (LBT) is a levy on “the entry of goods into a local area for consumption, use or sale therein”. This tax is imposed on traders by the local civic bodies of each city/town/area and are different in each place. LBT was introduced in Maharashtra under the provisions of Maharashtra Municipal Corporation Act, 1949, and the Bombay Provincial Municipal Corporation Rules, 2010. LBT replaced octroi, which was a cumbersome levy because the tax had to be paid at octroi check posts set up on city limits and a trader could not move the goods into the area until the amount was paid up. However, with LBT, the traders themselves are responsible for determining the tax amount and paying it.
LBT in Maharashtra:
LBT was started in Maharashtra in a phased manner from 2013, but was not received positively by traders. The opposition was mainly because of the possibility of double taxation between LBT and Value Added Tax (VAT), as well as the additional responsibility on traders of computing the tax. Following reconsiderations, local body tax was partially abolished in the state in August 2015, and under the amended rules, now only traders with a turnover of more than Rs. 50 crore per year have to pay LBT. Traders who are already registered under VAT rules are also automatically considered registered for LBT. Also, if a registered trader’s turnover goes down from Rs. 50 crore after registration, they will not be liable to pay Local Body Tax for the next fiscal year.
Goods that attract LBT in Maharashtra:
The Local Body Tax has 2 schedules of goods under it. Goods listed under Schedule A are taxable and those under Schedule B are non-taxable.
Items under Schedule A include:
Precious metals and articles made from them, precious stones, imitation jewellery, ores and minerals, aeroplanes and helicopters and their components, capacitors and bearings, agricultural machinery, electronic communication and electrical equipment, pump sets, industrial charcoal, renewable energy devices, iron and steel items, pipes, dry batteries, lime stone, aluminium and its alloys, crude oil and its products, LPG, aviation and motor fuel, printing ink and printed materials, helmets, torches, sports goods except footwear and apparel, writing instruments, bricks, bamboo, wood and bamboo pulp, textile articles, fabrics, handloom materials, cotton yarn, coir mattress, plastic footwear, hosiery goods, sanitary napkins, medicinal drugs, bandages and syringes, sugar, papads, arecanut, raw cashews, sunglasses, clay, coffee beans and chicory, green tea leaves, processed vegetables, edible oil, fertilizers, pulse flour, Glucose-D, herbs, flavouring essences, oil seeds, pizza bread, branded milk products, spices, sweets and snacks, vegetable oils, dry fruits, animal products, liquor and toddy, tobacco and its products, and aerated beverages.
Items under Schedule B include:
Manually operated agricultural implements, non-industrial charcoal, aides for physically challenged persons, equipment used for handspun yarn production, khadi garments, broomsticks and brushes, earthern pots and red soil, animal feed, betel and beedi leaves, books, bread, cereals and flours, clay lamps, contraceptives and drugs for family planning, drugs for treatment of cancer and HIV, semen and frozen semen, blood and its components, non-branded buttermilk and curd products, milk, fresh plants and flowers, fresh vegetables, bangles not made from precious metals, clay and POP idols of deities, bicycles and its components, kumkum, leaf utensils, raw meat and seafood, eggs, domestic animals and poultry except horse, National flag, stamp paper and postal items, organic manure, silk worm products, tender coconut, goods distributed through Public Distribution System, lac and its products, incense products and camphor, pre-fabricated domestic biogas units, newspapers, handmade washing soap, currency notes and coins, neera and arrack.
LBT in Various Cities of Maharashtra:
Local Body Tax rates vary in each municipal corporation, though the Schedule B of goods exempt from LBT is common for all cities. The general range of LBT is between 0.1 percent and 10 percent. The highest LBT is usually levied on Indian-made foreign liquor (IMFL), imported liquor, wines and country liquor. Currently, LBT is charged by the following local civic bodies:
- Pimpri Chinchwad
- Navi Mumbai
How to pay LBT in Maharashtra?
The Local Body Tax process comprises 4 parts:
- Registration: Dealers – buyers or sellers – who bring goods into a municipal corporation limit for sale, consumption or use – basically to earn profit through the sale of the goods – have to register themselves using Form A. If you are already registered under VAT rules, you do not have to register separately for LBT.
- Value Assessment: The value of goods has to be assessed by the traders themselves, and they have to pay the LBT dues based on the tax rates fixed as per Schedule A of the LBT Rules for the municipal corporation concerned. For example, if you are carrying raw cashew nut worth Rs. 30 lakh into Bhiwandi Municipal Corporation limits, you are liable to pay 4 percent LBT, which will be equal to Rs. 1.2 lakh. If there is any dispute on the value of the goods, the local body Commissioner can determine the amount based on the fair market price.
- Payment of LBT: The tax amount determined based on the LBT rates can be paid to the municipal body concerned via online payment, cheque, demand draft or in cash at the municipal offices or dedicated bank counters within 10 days of the following month – that is, within 40 days of movement of goods.
- Filing Returns: Returns for Local Body Tax have to be filed on a half-yearly and annual basis. Half-yearly return has to be filed by filling in Form E-I within 15 days from the end of the half-month period. Annual returns can be filed by filling in Form E-II within 15 days of the end of the assessment year.
Important Points about LBT:
Quoting LBT Registration Number: Sellers and buyers who are registered under LBT and are paying the tax, should mention their LBT registration number on invoices/bills/cash memos.
Maintaining Records: Under LBT rules, dealers have to maintain records and bill counterfoils of sales and purchases for at least 5 years.
Refund Provisions: If the goods imported from outside the city limits are moved out of the city without sale, consumption or use, then 90 percent of the LBT paid will be refunded to the dealer. Those who know that their goods will not be consumed in the city and will be re-exported, can apply with the local body to be allowed to pay only 10 percent of the LBT instead of claiming refund.