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Old 15th May 2013, 11:06   #31
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by Gautam Dhaliwal View Post
I have a basic question on this, does this mean that if I buy anything for my consumption from outside of Maharashtra - maybe even India, I don't have to pay octroi? In that case, I would just buy big items like cars etc from outside and get it registered here. And no more octroi on amazon purchases! This is a big plus for the consumer!
Experts - is my understanding correct?
This was true even during the Octroi regime. Nothing new today.
Why do you think you find so many rural registered vehicles plying regularly on Mumbai & Pune roads?

(You cannot get the vehicle registered within municipal limits and not pay octroi/lbt, so even though you purchase from outside: the moment you apply city number plate - you will have to shell out octroi/lbt)
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Old 15th May 2013, 11:11   #32
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by Gautam Dhaliwal View Post
I have a basic question on this, does this mean that if I buy anything for my consumption from outside of Maharashtra - maybe even India, I don't have to pay octroi? In that case, I would just buy big items like cars etc from outside and get it registered here. And no more octroi on amazon purchases! This is a big plus for the consumer!
Experts - is my understanding correct?
Sorry, the importer, clearer (in this case of amazon purchase the courier co) will apply LBT on the final bill, now if it lands in Bombay, there is no set off if you move it out of Bombay for consumption, say it goes to Gujarat where there is no LBT, in this case, the local importer will pay LBT but will not get a refund when it moves out of the taxation area, therefore double taxation. Every input into an LBT area has no set off. No refund if it moves out, thereby increasing the incidence of double taxation, double taxation is tax on already taxed goods.

Now tell me why would a Gujarati consumer pay Mumbai's LBT ?
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Old 15th May 2013, 11:39   #33
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This was true even during the Octroi regime. Nothing new today.
Why do you think you find so many rural registered vehicles plying regularly on Mumbai & Pune roads?

(You cannot get the vehicle registered within municipal limits and not pay octroi/lbt, so even though you purchase from outside: the moment you apply city number plate - you will have to shell out octroi/lbt)
thanks but i had a completely different understanding. Right now, if i get a car from outside to mumbai, i have to pay octroi as it is supposed to be paid the moment any goods enter Mumbai. LBT is a self assessment tax on traders/wholesalers/retailers. Since I am neither, why would i pay LBT?

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Sorry, the importer, clearer (in this case of amazon purchase the courier co) will apply LBT on the final bill, now if it lands in Bombay, there is no set off if you move it out of Bombay for consumption, say it goes to Gujarat where there is no LBT, in this case, the local importer will pay LBT but will not get a refund when it moves out of the taxation area, therefore double taxation. Every input into an LBT area has no set off. No refund if it moves out, thereby increasing the incidence of double taxation, double taxation is tax on already taxed goods.

Now tell me why would a Gujarati consumer pay Mumbai's LBT ?
Thanks but I still don't get this clearly, how is a courier company liable for LBT? It is not a trader, a courier company paying would be true for octroi. But in this case, for example, a trader orders 30 phones from amazon, the trader would have to pay LBT not the courier company. Therefore if i do not come under the ambit of LBT, i should not have to pay. Or do i come under its ambit?

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Last edited by moralfibre : 15th May 2013 at 16:49.
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Old 15th May 2013, 12:18   #34
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by Gautam Dhaliwal View Post
thanks but i had a completely different understanding. Right now, if i get a car from outside to mumbai, i have to pay octroi as it is supposed to be paid the moment any goods enter Mumbai. LBT is a self assessment tax on traders/wholesalers/retailers. Since I am neither, why would i pay LBT?
Quote:
Originally Posted by Gautam Dhaliwal View Post
Thanks but I still don't get this clearly, how is a courier company liable for LBT? It is not a trader, a courier company paying would be true for octroi. But in this case, for example, a trader orders 30 phones from amazon, the trader would have to pay LBT not the courier company. Therefore if i do not come under the ambit of LBT, i should not have to pay. Or do i come under its ambit?
Let me get this right:
1. you stay in Mumbai
2. your retailer stays in Surat
3. you purchase an item from this retailer
4. The retailer will use a transporter
5. The transporter pays an octroi, the charges for which it has already collected from the retailer. The octroi used to be 3-5% of the invoice value
6. Similarly, The retailer would've already charged you the octroi in the bill OR
7. It can instruct the transporter to ask for Octroi charges from the receiver

In case of LBT, even I am not clear of the mechanism, and how it will be enforced with a retailer who sits outside the municipal limit!
Perhaps the transporter would be deemed as a retailer? But that doesn't look logical.

Last edited by alpha1 : 15th May 2013 at 12:22.
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Old 15th May 2013, 12:31   #35
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by alpha1 View Post
Let me get this right:
1. you stay in Mumbai
2. your retailer stays in Surat
3. you purchase an item from this retailer
4. The retailer will use a transporter
5. The transporter pays an octroi, the charges for which it has already collected from the retailer. The octroi used to be 3-5% of the invoice value
6. Similarly, The retailer would've already charged you the octroi in the bill OR
7. It can instruct the transporter to ask for Octroi charges from the receiver

In case of LBT, even I am not clear of the mechanism, and how it will be enforced with a retailer who sits outside the municipal limit!
Perhaps the transporter would be deemed as a retailer? But that doesn't look logical.
Exactly!

It seems like we won't have to pay LBT - Can anyone confirm this?
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Old 15th May 2013, 13:45   #36
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Default Re: The LBT: Local body tax Fiasco

The whole exercise is misguided. India needs to move to a single-point taxation; which is the whole idea why GST was mooted. Ofcourse the states do not want to let go their authority in terms of tax-collection centre; so they are opposed to GST.

Tax breaks should be encouraged for small retailers/businesses to promote entrepreneurship and for better compliance.
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Old 15th May 2013, 14:09   #37
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Default Re: The LBT: Local body tax Fiasco

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The whole exercise is misguided. India needs to move to a single-point taxation; which is the whole idea why GST was mooted. Ofcourse the states do not want to let go their authority in terms of tax-collection centre; so they are opposed to GST.
Exactly, the focus should be on simplification of paperwork and processes, not complicating the situation further. GST is the only long term feasible solution, and the only reason that states are opposing GST is the loss of "upar ki kamaiii"

Have one flat tax across India and reduce the red tape once and for all.
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Old 15th May 2013, 15:32   #38
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Default Re: The LBT: Local body tax Fiasco

No one is arguing over paying this tax.

The law of collection is what the traders are against.

A LBT officer can stop any vehicle (including private vehicles) to check if there are any goods being carried and if LBT has been paid on that. So if you are checked and they can ask you to show whether you have paid LBT on your mobile phone.

The traders have to show the LBT officers the last 3 years of books (PL , Purchase register, Sales register ) when applying for the LBT number - if they find octroi has not been paid on a particular purchase - you have to pay the octroi and the penalty. Now imagine 3 years of books which will be checked for octroi paid and the amount that you will have to pay as penalty.

The officers can walk in anytime in your business premises and ask for books to be checked.

They have the authority to collect fines on the spot.

If you do not pay, they have the authority to seal your unit.

After you pay the penalty only then you can file an appeal.

So you have to keep the papers up to date - the traders cannot do it since they will be busy so they have to appoint CA's and other people to do that ....who are also under the LBT for their services.

Beauty parlors, pan wallas, chai wallas all under the LBT.

For example - if I buy some stuff from a shop, it will be my responsibility to check and ensure that the shop has paid the LBT. Why should I ensure that? If I do not and they get a whiff, I also will have to pay penalty on it !


The govt and it's agents kept the octroi regime going only in Maharashtra state in India - now they are getting rid of it and getting in the LBT to cover the loss of revenue. They say 7000 crore rupees were collected by octroi and 2-3 times more than that amount was earned by the agents who helped the people in evading octroi - now suddenly their income stops if Octroi is abolished - what do they do ? LBT !

Infact the traders have asked for the Gujarat model to be implemented where the tax is clubbed under VAT. If VAT is 5%, they have increased it to 6% and the 1% extra collected as LBT is distributed to the municipality by the State internally. It is a simple system and works effectively.

Also the Maharshtra Govy has said that even if GST is implemented , LBT will be applicable....so is it time to shut shop in Maharashtra ?

A couple of reasons why the govt is doing all this --

The MNC's are coming - the Walmart's and big companies and the govt pushing LBT to get the small traders out so that competition is killed before the MNC start operations.

IF the traders are out - huge amount of land will be freed which can be turned into malls and stuff.

Last edited by Rudra Sen : 15th May 2013 at 16:20. Reason: removing what you know.
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Old 15th May 2013, 15:59   #39
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by normally_crazy View Post
.....
For example - if I buy some stuff from a shop, it will be my responsibility to check and ensure that the shop has paid the LBT. Why should I ensure that? If I do not and they get a whiff, I also will have to pay penalty on it !


.......
Is this true? How can it be my responsibility to check that a shop has paid LBT? And how can i do that even? I can only check if its in my bill, but payment of LBT by the shop is a separate process. This can't possibly be implemented.

My question still remains, maybe you can help. If i order something from amazon, presumably as octroi will not be there, the courier company will not have to pay anything. Is it my responsibility to pay LBT? Should not be, since i am not a trader. Does this mean stuff purchased from out of Maharashtra is cheaper for me?
E.g. even in your mobile phone example, i can easily prove that the seller was from out of state and hence no LBT was to be paid.
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Old 15th May 2013, 16:28   #40
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by Gautam Dhaliwal View Post
Is this true? How can it be my responsibility to check that a shop has paid LBT? And how can i do that even? I can only check if its in my bill, but payment of LBT by the shop is a separate process. This can't possibly be implemented.

My question still remains, maybe you can help. If i order something from amazon, presumably as octroi will not be there, the courier company will not have to pay anything. Is it my responsibility to pay LBT? Should not be, since i am not a trader. Does this mean stuff purchased from out of Maharashtra is cheaper for me?
E.g. even in your mobile phone example, i can easily prove that the seller was from out of state and hence no LBT was to be paid.
Well as per rules - every buyer has to be registered with an LBT number. There is a little confusion on how personal buyers are gong to be handled...will let you know if that clears out. But remember - LBT will have to be paid if goods coming from outside your municipality limits.

Mobile phone - you should show them the bill from where you got the phone. That should have an LBT number..if it doesn't the seller hasn't paid LBT (cheated the govt) and you bought stuff imported into the state illegally.
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Old 15th May 2013, 16:35   #41
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by normally_crazy View Post
Well as per rules - every buyer has to be registered with an LBT number. There is a little confusion on how personal buyers are gong to be handled...will let you know if that clears out. But remember - LBT will have to be paid if goods coming from outside your municipality limits.

Mobile phone - you should show them the bill from where you got the phone. That should have an LBT number..if it doesn't the seller hasn't paid LBT (cheated the govt) and you bought stuff imported into the state illegally.
How will amazon get an LBT number or pay LBT? Or even a seller in Delhi, i'm sure they don't have to pay LBT. Neither do i, i think.
This is too complex, in any case isn't LBT supposed to be paid on purchases by a trader/retailer and is not linked to sales of the purchases unlike VAT.
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Old 15th May 2013, 16:47   #42
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by alpha1 View Post

I wonder how the municipal corporations of other cities in India run without Octroi/LBT?
Is this Octroi/LBT really required?
Maharashtra has consistently been the highest tax collecting state since the implementation of V.A.T. (12.5% V/s 5.5%) in most states. You tell me, what have you got in terms of government infrastructure in the last 10 years?

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Originally Posted by alpha1 View Post
Perhaps I am really dimwitted, (and that explains why I don't have the mettle for a retail business, or politics or ...): but I don't get it. The same people were paying the Octroi earlier ... right?
So what has changed now?
As indicated above, V.A.T. in Maharashtra is levied at a massive 12.5% opposed to 5.5% in most other states. At time of introduction of the comparatively higher rate of V.A.T., it was informally informed that the higher rate of V.A.T. would factor in for the octroi levy of 5.5% that was soon to be abolished. For over 5 years businesses within Octroi limits have been hoping for Octroi to be abolished. Now when the government has finally gotten around it, they have introduced L.B.T. which has left the traders' union aghast.

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Originally Posted by sgiitk View Post
I just do not understand. With GST (hopefully) on the cards all these local taxes Octroi, LBT or whatever will have to go! I smell a rat here.
True, there is surely more that meets the eye here.

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Also the unnecessary traffic build up at Octroi check points (where even the cars get stuck - ask those to commute to Mumbai from Mira Road or Thane or New Bombay) will stop.
Firstly, I personally think that the whole traffic build up issue is blown way out of proportion. I pass atleast one octroi post twice a day five times a week and a traffic build up is a very rare phenomenon. There is exponentially worse traffic caused due to inadequate and sub standard infrastructure but the government would not do a thing about that.

Also, what is your argument of replacing NMMC cess with the NMMC LBT? In terms of book keeping and procedures it is identical to LBT but Cess was charged at a flat rate of 1%, whereas if your goods are not classified under the tiny chapter of LBT, flat 4% is the norm.

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new avenues to corruption will come up but since this will all be computerised it will be more difficult. Also the Govt. is providing the software to maintain this so the shop keepers need not worry at some level.
Computerized or not, the LBT is going to provide a concrete platform for corruption.

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Originally Posted by ACM View Post

The Consumer will not really be affected as this is meant to replace the Octroi. Though many Traders are misleading end consumers into thinking that they are the ones who should protest instead of the Traders.
From basic understanding of business, any cost / expense will be charged to the end customer as it is a cost to the trader. I do not understand how you presume that a trader is going to absorb a 4% levy. Even in the octroi regime, a trader obviously factored his cost of octroi (5.5%) in basic price before billing goods to the customer.

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Originally Posted by sukhoi30 View Post
If they say that government officials will harass them and bribery increases, then thats a myth. If all papers are in order, then no government official can look for a bribe and if they do, then these retailers need to stand up and protest then.
You ridicule a group protesting for what they think is unjust and insist they should protest if someone is being harassed. Welcome to India, Sir!
What do you think should be the form / nature of protest if someone is indeed harassed over their assessment returns. I take it that you are not familiar with terms like Diwali and have never tipped a government servant, even if it was for jumping a traffic light.

Quote:
Originally Posted by Gautam Dhaliwal View Post
I have a basic question on this, does this mean that if I buy anything for my consumption from outside of Maharashtra - maybe even India, I don't have to pay octroi? In that case, I would just buy big items like cars etc from outside and get it registered here. And no more octroi on amazon purchases! This is a big plus for the consumer!
Experts - is my understanding correct?
Quote:
Originally Posted by Gautam Dhaliwal View Post
Exactly!

It seems like we won't have to pay LBT - Can anyone confirm this?
You have to pay LBT on each article (even a camera that was purchased at MRP) that comes into Mumbai from outside the city. If you have purchased it yourself, there would be a case where you would personally have to go and pay the LBT entry tax personally, which even was the case with Octroi.

Forget inter state, even if you bring something from Thane or Navi Mumbai into Mumbai you are liable to pay local body tax over the cost of article and its subequent freight cost.

Quote:
Originally Posted by alpha1 View Post

In case of LBT, even I am not clear of the mechanism, and how it will be enforced with a retailer who sits outside the municipal limit!
Transporter will not pay LBT. Octroi was charged at sight whilst the local body tax will be paid by you on a monthly errand and would require a half yearly or yearly assessment, similar to V.A.T.

Quote:
Originally Posted by normally_crazy View Post

Mobile phone - you should show them the bill from where you got the phone. That should have an LBT number..if it doesn't the seller hasn't paid LBT (cheated the govt) and you bought stuff imported into the state illegally.
Which implies you should pay the LBT liability towards the same along with applicable interest and penalties.

Last edited by manson : 15th May 2013 at 16:49.
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Old 15th May 2013, 16:51   #43
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The problem is with the authority given to corrupt municipal officers and the hassle a small trader has maintaining stock sales and purchase registers.
It will only cause more harassment for the traders and more hafta for the municipal guys.
All this when octroi was going to be phased out.
When other states can live without it why can't Maharashtra ?
I have shifted my business out of Maharashtra to Silvassa.
It is a complete change of environment. Government officers actually help without any expectation of a bribe. It is a magical world especially so if you have run a business in Mumbai.

People who feel prices won't increase because octroi was already being paid are wrong.
Octroi was being evaded.
When traders will have to cough up the lbt they will recover it from the consumers.
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Old 15th May 2013, 16:57   #44
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Default Re: The LBT: Local body tax Fiasco

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You have to pay LBT on each article (even a camera that was purchased at MRP) that comes into Mumbai from outside the city. If you have purchased it yourself, there would be a case where you would personally have to go and pay the LBT entry tax personally, which even was the case with Octroi.

Forget inter state, even if you bring something from Thane or Navi Mumbai into Mumbai you are liable to pay local body tax over the cost of article and its subequent freight cost.
Are you seriously suggesting that because I buy a lot of stuff from Amazon (it's a nightmare trying to get a size 13 squash shoe in India), I have to get an LBT registration, and pay LBT every 40 days. Surely that can't be true!
Remember, with octroi, everything was done at entry and i didn't have to be assessed or pay tax directly.
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Old 15th May 2013, 17:03   #45
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Default Re: The LBT: Local body tax Fiasco

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Maharashtra has consistently been the highest tax collecting state since the implementation of V.A.T. (12.5% V/s 5.5%) in most states. You tell me, what have you got in terms of government infrastructure in the last 10 years?
Not true! Here in karnataka we pay 14.5% VAT
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