Retail chains, kiranas differ over LBT

The differences between organised retail chains and traditional trade over the local body tax (LBT), to be imposed by Municipal Corporation of Greater Mumbai (MCGM) from October 1, have come out in the open.

While retail chains say the tax is "transparent and better administered", the Federation of Associations of Maharashtra (FAM), which has called for an indefinite strike against LBT, says it will open one more "window of corruption".

Read: What is LBT

According to LBT, traders who earn more than Rs 3 lakh per annum have to take a registration number and pay zero to seven per cent tax on transactions. They should maintain a record of sales and file monthly returns. LBT replaces Octroi, which is levied by civic corporations across Maharashtra since 2010.

About 750 trade associations in Maharashtra, which comprise wholesellers and traders, are participating in the strike, while organised retail chains are staying out of it.

"The levy of LBT is, to our understanding, an assessment-based tax and is being introduced with the intension of removing the current imperial method of levy of Octroi at check posts," said a note issued by Retailers Association of India (RAI), a body representing organised retail chains.

"We believe an assessment-based tax structure, as with all other taxes in India, is better administered and brings greater transparency in the system," RAI said.

But FAM thinks otherwise.

"Under LBT, we have to be assessed by MCGM. Whether they are capable of assessing us, we do not know. It will open one more window of corruption after the abolition of Octroi," said Mohan Gurnani, president of FAM. "We don't want to be assessed by one more department. We can't undergo unnecessary harassment."

Many big organised retailers Business Standard spoke to said they had no issues with LBT. "LBT will allow free flow of goods and wherever the civic bodies have migrated to new system, it has been functioning smoothly. The rate of LBT is lower in many essential items," said an executive with Future group, who did not want to be identified.

Added a top executive from D Mart: "It's just a self declaration of income. Whatever goods come from outside, we have to file returns. It's much better than Octroi."

On Saturday, the indefinite strike by wholesalers in Maharashtra entered the 20th day, while that of retailers in Mumbai entered the seventh day.

Some retail chains think they might see shortage of products if the strike continues further. "Many traders still supply to big retail chains like us. If the strike continues, we may face shortage of certain products," said one official of a retail chain.