What is LBT and why Maharashtra traders are against it

Traders says the proposed tax is a monster because it puts on them the onus to assess, compute and pay local body tax

LBT, or Local Body Tax, is a cess that the Maharashtra government wants to levy on the entry of goods for use and consumption within the jurisdictions of local municipal corporations.

The state government will implement LBT to replace the traditional octroi.

In Mumbai, which is the only city where octroi is levied at 4%, LBT will come into effect from October, while other cities, such as Thane, Navi Mumbai, Nagpur, Pune, have already gone the LBT way.

After octroi is scrapped, traders' wagons will not be inspected at check posts. But the relief that octroi's removal would have brought has been diluted already by the introduction of LBT. Traders and businessmen in the state have shut their shops and establishments because of this tax. 

According to the Confederation of All India Traders, the strike has already resulted in business loss of more than Rs 75,000 crore, causing a revenue loss of about Rs 9,000 crore to the Maharashtra government. (Read here)

Why are the traders up in arms against LBT

Traders think that the tax is a monster. Under LBT, the onus to assess, compute and pay local tax will be on them. 

As per the rules, all traders will be required to check their LBT liabilities by compiling the list of goods they procured within a month and feed the details into a software provided by their municipal corporations. After computing the liability, they can pay the tax online, through cheque, demand draft or cash. The payments would be accepted at banks designated by the municipal corporations or at offices of civic bodies.

Why traders don't want it

Traders have two key objections to LBT:

First, they do not want the responsibility of computing their own tax liability because that would mean additional expenses for them.

Second, they say they are already pay Value Added Tax, or VAT, and LBT will expose them to the perils of double taxation.