Maha mulls scrapping LBT, may offset with VAT hike

With an eye on Assembly elections scheduled later this year, Maharashtra government is mulling over scrapping of controversial Local Body Tax (LBT) which is in force except Mumbai and is being stridently opposed by the traders.

The government may increase Value Added Tax (VAT) to compensate the withdrawal of LBT, sources said.

LBT was being introduced in Maharashtra in a phased manner from 2010 beginning with tier-III cities by scrapping octroi (local tax collected on various articles brought into a district for consumption). In 2013, the LBT was also applied to tier-II and tier-I cities except the state Capital.

However, the move triggered protests from traders across the state who feared that the new tax regime will add to harassment by officials and saddle them with the "cumbersome" process of maintaining account.

The traders were also of the view that LBT is a financial burden as VAT was still under implementation.

There were suggestions to increase VAT instead of LBT but some quarters feel that money collected by state government through VAT would have to be transferred to civic bodies in form of grant, which would hamper the financial autonomy of civic bodies.

According to sources, a proposal is likely to be formulated soon regarding scrapping of LBT.