LBT - TO PAY OR NOT TO PAY?
By Ruma Dubey
While the national news channels are busy covering the fiasco which we call democracy and the business news channels are covering the spike in stock markets, those in Mumbai are being put through a lot of hardship. In fact the people in Mumbai do not know if they will get their milk or veggies/fruits, groceries; their food security has come under threat!
The traders – wholesaleres and retailers are protesting against the imposition of Local Body Tax (LBT). The Maharashtra government has formally abolished Octroi in Thane, Navi Mumbai, Nagpur, Pune and Pimpri-Chinchwad municipal corporations and planning to replace it with LBT. It is to be introduced in Mumbai’s civic body, where the annual Octroi duty collection is about Rs 7,000 crore, from October 1. It has already been introduced in 20 out of Maharashtra’s 26 civic bodies.
The Govt abolished octroi because it had become a completely corrupt system, with very little money trickling down to the civic body. The LBT is a new version of octroi except that it covers more people, is more transparent and will become a big money earner for the Bombay Municipal Corporation (BMC). In octroi, the goods in the trucks are physically checked by the officials posted at the various naka’s whereas in LBT, it is self assessed and one has to make payment online; there is no money exchanged between the officials and traders and that, in many ways helps it curb corruption.
Octroi is harassment for traders where goods are forcibly checked and many of us at check nakas would have seen money being palmed off to the officials. Corruption there is blatant and transparent for all to see. Money is usually pocketed by the officials when most of the time no ‘challans’ are given, not to mention the serpentine lines at the nakas causing traffic jams.
LBT is merely replacing octroi and will be valid on the sale or consumption of certain products and LBT will be charged on overall turnover of merchants. This has to be paid once every 40 days using online portals, cheque, demand draft or cash through a designated bank or counters of the civic bodies. The tax will be collected on the basis of the books of accounts like VAT. More importantly, it will be imposed on any trader with a turnover of not less than Rs.5000, which means almost every small shopkeeper, right from the paanwallah to the neighbourhood kirana will now come under the gambit of LBT. But the Govt has clarified that small traders with an annual turnover of up to Rs 3 lakh need not pay LBT.
Basically it is a tax on purchase and not sale of goods. Suppose your shop is in Thane area and you are purchasing goods from outside Thane, then LBT will be applicable on Gross Purchase Value. And if you are selling goods outside Thane, and that area too falls under LBT, then the buyer will pay the LBT on the purchase. If you are buying/selling within Thane region then there will be no LBT but the trader will have to keep records of all buying and selling as there would be a yearly audit.
When one reads all this, it comes forth that LBT, which is replacing octroi is surely much better, right? So then why are the traders protesting with this indefinite strike? Traders say that this is a double taxation as traders are already paying VAT. Plus traders say that with them now required to maintain books, records and other back office work, these admin costs will also be an additional burden. There is also worry that it will lead to a rise in the prices of essential commodities and will give powers to Municipal officer to grill the businessman about day to day activities.
The picture will become clearer only once this agitation comes to a logical conclusion. The entire city is currently being held to ransom by the traders just as the politicians are holding the entire country to ransom. We in between, suffer all along… the price we pay for not getting out and exercising our voting rights!