Maharashtra govt explores options to replace LBT

Traders want BJP to fulfil its poll promise

The new Bharatiya Janata Party (BJP) government in Maharashtra is exploring various options such as turnover tax, purchase tax, and surcharge on value-added tax (VAT) to abolish local body tax (LBT) implemented in 25 municipal corporations — except BrihanMumbai Municipal Corporation, where octroi duty is collected. The government hopes to zero in on one of these options so that civic bodies will continue to collect about Rs 15,000 crore annually to spend on development projects.

In its poll manifesto, the BJP had promised to scrap the LBT. Traders across the state had vehemently opposed LBT, which forced the previous government led by the Congress and the Nationalist Congress Party to ask bodies to decide whether to go back to the octroi regime.

The turnover tax will be a cess on the turnover of the trader, while the purchase tax will be part of the VAT Act after some  modification.  Another option is a 1-3 per cent surcharge on VAT.

The government will also have to take a decision to abolish octroi duty — a major source of revenue for the Shiv Sena-BJP ruled BrihanMumbai Municipal Corporation.

Maharashtra Chief Minister Devendra Fadnavis told Business Standard: “The government is committed to abolishing LBT. However, the decision in this regard will be taken after proper assessment.”

However, traders insist the government should take a quick decision in this regard as promised by the BJP in the run-up to the state Assembly election.

Mohan Gurnani, president, Federation of Associations of Maharashtra, said a meeting would be convened on November 4 to press for the abolition of octroi and LBT.

“The BJP had assured in writing that it would abolish octroi and LBT after coming to power. Therefore, we look forward to the government for a decision in this regard at the earliest. The government should consider subsuming LBT in VAT, which is possible. This will also protect the autonomy of civic bodies and it will be a win-win situation for all.”

LBT was introduced in 2010. Like octroi, LBT is levied and collected by the Municipal Corporation on goods brought into the city for consumption or sale, but unlike octroi, LBT is account-based. On the other hand, octroi uses a strong-arm method of stopping incoming goods at check posts for recovering the tax. For LBT, the government expects Importers to maintain truthful accounts of their imports and pay taxes accordingly, filing just two returns every year in the process.