Local Body Tax (LBT Tax) is imposed by the local civic bodies of India on the entry of goods into local area for consumption or use or sale, it is to be paid by the trader to the civic body and the rules and regulations differ for different states. As of 15th August, 2015, the LBT is partially abolished.
Features of Local Body Tax:
Maharashtra is the only states that impose the LBT. Other features of LBT are as follows:
- The registered traders has to pay the tax within 40 days.
- Traders whose annual turnover of purchase and sales which is taxable is not less than Rs.5,000 and the annual turnover of sales and purchase is not less than Rs.1 lakh is to be registered with the municipality or the local civic body.
- The tax must be paid by the trader via the online portals, demand draft, cheque or cash to the designated bank account or at the special counters that have been opened by the civic body.
- If the LBT paid goods are exported outside the city, 90% of the LBT paid can be refunded subject to certain conditions.
- Half-yearly returns are to be filed by the dealers.
- The traders will have to maintain the records for 10 years.
Penalties are charged if the trader delays making the payment or fails to register or if the trader fails to state correct liability or if the trader fails to present bills, invoice or other required documents.
Octroi was cancelled in Gujarat in the year 2007 and the VAT was increased. LBT in Maharashtra was introduced in a phased manner. In 2010, LBT was introduced to Tier III cities and in 2013 it was introduced to Tier II and Tier I cities.
Rates of LBT:
Schedule A specifies the LBT rates. The rates vary from city to city. The LBT rate for most products is 4%. Schedule B provides list of goods that are exempt from LBT. The goods that are exempt are cereal, specified textile items, specified food products, etc.
LBT is to be paid on the invoice price charged for a particular transaction.
Who must pay the LBT?
The LBT is to be paid by the dealer who brings in the goods to the city. If a person who is not registered imports the goods and sells it to a registered dealer, then the registered dealer is liable to discharge LBT unless there is a proof of paying LBT on the goods in that city.
Particulars of the Dealer’s Invoice:
The dealer's invoice must contain the following:
- Full name of the business
- Style of the business
- Business address
- LBT registration certificate number
- Particulars of goods sold and its price
- Declaration of the sale being made
The half yearly return is to be filed in the Form E-I within 15 days from the end of the half year. The annual return is to be filed in the Form E-II within 15 days from the end of the year.
Records that are to be maintained:
The dealers are required to keep the following records:
- True account of value of goods imported, purchases, consumed or sold.
- Record of counterfoil issued in respect of the goods that is imported.
- Register of purchases.
- Register of receipts of goods on transfer basis.
- The records are to be preserved for a minimum of 5 years.
Exemptions or Deductions Available:
Full or partial exemptions are provided for following cases:
- If the goods are imported in behalf of the state or central government and if it is meant for public purpose and not to be used for the intent to earn profit.
- If the goods are rejected by the purchaser within 6 months from the date of export.
- If the goods are exported out of India.
- Goods received or sent for job work.
Dealers having less than Rs.10 lakh turnover can opt to pay LBT on the prescribed slab. Composition scheme has been introduced to specified builders and contractors who are undertaking construction within the city limit. The builder can pay the LBT as follows:
- Rs.100 per sqm for construction up to 4 floors without lift.
- Rs.150 per sqm for construction up to 7 floors with lift.
- Rs.200 per sqm for construction above 7 floors.
Refund Provisions under LBT:
LBT provides 90% refund on goods imported outside the city limits that are moved out without consumption or use within the city limits.
Dealer who is regularly importing or re-exporting and if the goods are specified in Schedule A can obtain permission from Commissioner to pay 10% of the LBT to avoid claiming for refund.