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Old 16th May 2013, 15:17   #61
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by scopriobharath View Post
If he is a defaulter and assuming i am even ready to pay, how will the govt track me down?
Exactly why I said the government would be knocking on your door if the seller has maintained a sales book.

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Originally Posted by ACM View Post
Octroi already is known to be a major source of corruption. Infact the Octroi collection officers have earlier gone of strike to protest against it's removal for obvious reasons.
And you think LBT officers are going to be any less corrupt? If anything they will beat their own path using the LBT platform this time around.

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Originally Posted by ACM View Post
I do get stuck in octroi naka jams a lot at both dahisar and thane ends - at night when the trucks are allowed into the city post 10 pm. (I stay at thane) so to catch an early morning or late night flight I should be able to breeze through but can't and need to keep a large safety margin as if one is stuck it can even be an additional hr.
I get stuck in jams all over the place round the clock for poor and inadequate roads, and very often also because of hawkers occupying a reasonable fraction of prime streets which is obviously only possible with an understanding with the local ward officers. There are a zillion other things to do for improving traffic conditions than taking down octroi. This achieving better traffic condition by removal of octroi posts is just a side effect of LBT and not its motto.

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Originally Posted by ACM View Post
LBT is replacing Octroi and the LBT rate is not higher than that of Octroi so how and why would the consumer be affected. If at all he will save a bit. In anycase both these taxes have to be within the MRP price of the product as per the low of the land.
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Originally Posted by ACM View Post
Actually I see no reason why Navi Mumbai should today have a different (lower taxation rate compared to Mumbai and why Thane should have a higher rate than Mumbai. Frankly would be the first to advocate that all three should have the same rates.
The infrastructure and basic facilities in the Navi Mumbai was half a generation (if not full) behind Thane until days five years ago, and despite the recent updates it is till date struggling. Have you seen the state and frequency of bus stops, trains and autos in Navi Mumbai? I'm not even going to compare it with Mumbai.
Incentives for starting up a business in not so favorable atmosphere are not alien to state governments in India, and an octroi less regime in Navi Mumbai is just exactly that.

Also, going by your school of thought, how exactly do you justify the axing of Octroi and other forms of entry tax in most other states barring Maharashtra? Are not all of them a part of India, just like Mumbai, Thane, Navi Mumbai are a part of Maharashtra? Should our state government not discriminate and abolish Cess / Octroi / LBT just like most other states, and all of those interested in promoting the primary sector.

What do you think are the reasons for a steep decline in industrial growth in Maharashtra over the last 5 years? It does not take a genius to declare that Maharashtra has indeed lost out to other states, and the current state of affairs is only going to make it worse.

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Originally Posted by ACM View Post
I did not get any informal indication of Octroi being a part of VAT - no one told me
Blessing in disguise for you then, atleast you were not left hoping endlessly. Why then do you think is V.A.T. levied at 12.5% in Maharashtra compared to 5.5% in most other states? This is a blessing for a consumer in Maharashtra / Gujarat who is for example purchasing from Punjab or Rajasthan and does not want to run around and grease a few palms for having a 'C' form sanctioned.

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Originally Posted by Gautam Dhaliwal View Post

We can get cheaper stuff by buying from outside Maharasthra!

So no octroi has some benefit for us.
Resulting in a loss of sale to the local dealer and implying a loss of revenue to the state machinery. Wish it was as simple to drive this point home to the CM's cabinet.
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Old 16th May 2013, 16:05   #62
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by srgntpepper View Post
However, in the way it is structured, LBT is going to be disastrous not only for traders but also for manufacturers in Maharastra.

Certain examples :

2) Lets say a trader imports goods and stocks them at Bhiwandi. He pays one layer of LBT at the port. When he sells the same goods to me, he adds another layer of LBT. I use those goods to manufacture something, and when I sell them, I have to add a third layer of LBT. Now if you assume the trader worked at a 3% margin and I at a 10% margin. earlier situation goods worth Rs 100 at Nhava Sheva could be sold at 100*1.03*1.1= Rs113.3. Now if the profit margin is to be retained for a 1.5% LBT at each stage, the final selling price will be 116.7. So, on a value addition/profit of Rs 13, the govt will collect Rs 3.4 tax, ie the LBT is equivalent to a 26% Income tax layer.
This will have to be borne by the consumers.

Comparison to octroi is not fair. octroi was an entry tax. LBT is applicable at each stage on the entire value, not on the value addition at each stage.. Since it cannot be setoff, it is double/triple taxation.

3) Since this is not applicable outside of maharashtra, manufacturers here will be handicapped against those outside. Traders in Maharashtra will simply not be sell outside; why would anybody buy from a source here, when the same thing can be bought cheaper from Gujarat?

Even a 10% state income tax might be a better option than LBT. Atleast it will be a one time annual return, not a daily transaction with multiple ledgers to maintain.
There is a lot of misinformation floating around. Quoting from the link i had posted earlier -

"Where any goods which are imported in the City on which LBT has been paid, are exported outside the City by the same person by way of sale or otherwise, then ninety percent of such amount of LBT so paid, shall be refunded to that person...."

So there is a refund provision

"If any goods held by a dealer or a person in the City are moved outside the City for carrying out the processes enumerated in the Explanation to this rule, and are re-imported without effecting any change in condition or appearance, as also the ownership of the goods, the value of the goods moves out, shall be allowed to be deducted from the total value of processed goods reimported and LBT shall be leviable only on the value added i.e. Processing charges, transfer charges, etc."

So it is only on value added and not the whole cost multiple times.

The main opposition i have heard is about it's applicability being too wide and small traders having to maintain records.

Don't know where this other information is coming from which people are claiming as facts.
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Old 16th May 2013, 17:14   #63
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by Gautam Dhaliwal View Post
There is a lot of misinformation floating around. Quoting from the link i had posted earlier -

"Where any goods which are imported in the City on which LBT has been paid, are exported outside the City by the same person by way of sale or otherwise, then ninety percent of such amount of LBT so paid, shall be refunded to that person...."

So there is a refund provision
Why only 90% refund? If the goods are not staying in the City, why whould 10% be payable. And even then, Sales Tax has a refund provision. Do you know the delays and the corruption in getting those refunds? People dont apply for refunds even when due because of the harassment it entails.

Quote:
Originally Posted by Gautam Dhaliwal View Post
"If any goods held by a dealer or a person in the City are moved outside the City for carrying out the processes enumerated in the Explanation to this rule, and are re-imported without effecting any change in condition or appearance, as also the ownership of the goods, the value of the goods moves out, shall be allowed to be deducted from the total value of processed goods reimported and LBT shall be leviable only on the value added i.e. Processing charges, transfer charges, etc."

So it is only on value added and not the whole cost multiple times.
This is paradoxical to the point of being useless. It says processing without change in appearance and without change in ownership. The approved processes themselves are extremely limited and will necessarily involve change in appearance " For this purpose processing shall include –
a. Grinding, dyeing, bleaching, painting, printing, finishing, stentering, embroidering, doubling, twisting, metallising and electroplating;
b. Building and mounting of bodies over chassis of vehicles of all kinds and shall also include such other processes as may be approved by the Commissioner, from time to time.
The decision of the Commissioner in this respect shall be final."

So if you purchased a pipe in Bombay, and sent it to Gujarat for electroplating, you will pay LBT on value of the pipe, as well as on the electroplated pipe becus the appearance has changed. When you sell the imported electroplated pipe outside your City, you don't get a refund becus then the ownership will change. This is not value added taxation.

The first line in my post said that there are vested interests opposing this, but this law is bad, there is no doubt about it. Countering the vested interests can be done in a less draconian manner.
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Old 16th May 2013, 18:20   #64
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by manson View Post
Exactly why I said the government would be knocking on your door if the seller has maintained a sales book.

Resulting in a loss of sale to the local dealer and implying a loss of revenue to the state machinery. Wish it was as simple to drive this point home to the CM's cabinet.
Question 1: Is it good to assume that the shops would maintain even address info of consumers? I mean how would the Govt knock at my door? So this translates to the fact that I need to show a local address proof whenever i make a purchase, whether it is a matchbox from a local provision shop or a million rupee car.

The above leads to multiple questions on how temporary visitors would be handled. What if one is staying in Mumbai for say a week in a hotel or someone is visiting a relative in Mumbai. Secondly, should we carry a copy of address proof to be shown at each and every retailer.

Question 2: If i drive down to Daman & Diu and bring back a Samsung Tablet for 35200 (40,000 in mumbai incl taxes) how should this scenario be handled.

Scenario 1: How will be govt know i have brought it in? Will the govt raid any house and seize anything without a bill / LBT proof?

Scenario 2: If i want to pay the LBT voluntarily, could i walk upto some place / govt agency and pay up the LBT as an individual ?

Scenario 3: If i buy a second hand item from Quikr.com, assuming that LBT is already paid on that item, should i pay LBT Again, just because it is changing hands (Similar to Income Tax).
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Old 17th May 2013, 11:30   #65
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by srgntpepper View Post
Why only 90% refund? If the goods are not staying in the City, why whould 10% be payable. And even then, Sales Tax has a refund provision. Do you know the delays and the corruption in getting those refunds? People dont apply for refunds even when due because of the harassment it entails.


This is paradoxical to the point of being useless. It says processing without change in appearance and without change in ownership. The approved processes themselves are extremely limited and will necessarily involve change in appearance " For this purpose processing shall include –
a. Grinding, dyeing, bleaching, painting, printing, finishing, stentering, embroidering, doubling, twisting, metallising and electroplating;
b. Building and mounting of bodies over chassis of vehicles of all kinds and shall also include such other processes as may be approved by the Commissioner, from time to time.
The decision of the Commissioner in this respect shall be final."

So if you purchased a pipe in Bombay, and sent it to Gujarat for electroplating, you will pay LBT on value of the pipe, as well as on the electroplated pipe becus the appearance has changed. When you sell the imported electroplated pipe outside your City, you don't get a refund becus then the ownership will change. This is not value added taxation.
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Originally Posted by scopriobharath View Post
Question 2: If i drive down to Daman & Diu and bring back a Samsung Tablet for 35200 (40,000 in mumbai incl taxes) how should this scenario be handled.

Scenario 1: How will be govt know i have brought it in? Will the govt raid any house and seize anything without a bill / LBT proof?

Scenario 2: If i want to pay the LBT voluntarily, could i walk upto some place / govt agency and pay up the LBT as an individual ?

Scenario 3: If i buy a second hand item from Quikr.com, assuming that LBT is already paid on that item, should i pay LBT Again, just because it is changing hands (Similar to Income Tax).
Your second post's questions are very similar to the ones i had asked before on this thread. After more research, i found out that individuals importing stuff for their own consumption are exempt from LBT. Please see my post earlier on this page.

On your reply to me -

Where do i start?

It's a poorly drafted line that you have pointed out

It should read
"... If any goods held by a dealer or a person in the City are moved outside the City for carrying out the processes enumerated in the Explanation to this rule, OR are re-imported without effecting any change in condition or appearance, as also the ownership of the goods."

A similarly worded exemption prevails on refund of octroi so i presume the intent was the same.

For octroi -
"That the articles exported have not since their import changed their original form, condition, state of appearance by any process of manufacture or otherwise except as specifically provided for in these rules."
from - http://www.octroi.net/

On the point of limited processes, there is a provision of evolving what processes would be eligible. "....and shall also include such other processes as may be approved by the Commissioner, from time to time."

Your point about refunds now is that they are hard to get, maybe, i can't claim to know the difficulty in that process.

Your post before did not make these points, you said no refunds are available and that there is multiple taxation. However, now you realize that the point is more nuanced. In one case there is poor drafting and intent seems to be clearly to tax only the value added. In the other scenario there is the process of refunds that we should be discussing and that refund is not available for 10% of the LBT.

However, I want to make a different point today. I like our forum, the members here have to write in proper English, they have to observe rules to make sure a certain level of quality is maintained, members here obviously have access to the internet.

A majority of Indians don't have proper education, access to internet etc. What i want to ask today is when members on this forum post on a topic like LBT and say things like no refunds, LBT inspectors will come to your house for a 5000 rupee thing you purchased etc etc. Doesn't that decrease the quality that most members work towards maintaining? What source are we depending on? The neighborhood grocery store or paan waala? There is a lot of misinformation out there and as educated people with access to the internet and the help of our forum brethren (as we may not understand law) we can get to the right information.

I am very disappointed! Maybe anyone replying to a query on certain identified threads can only reply quoting a credible source, which can't be a paanwaala.

Moderators, over to you. Please understand this is not an attack against specific people. Instead a description of a problem i see with our community which i would like to see getting better and better.
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Old 20th May 2013, 17:23   #66
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by Gautam Dhaliwal View Post
What i want to ask today is when members on this forum post on a topic like LBT and say things like no refunds, LBT inspectors will come to your house for a 5000 rupee thing you purchased etc etc. Doesn't that decrease the quality that most members work towards maintaining? What source are we depending on? The neighborhood grocery store or paan waala? There is a lot of misinformation out there and as educated people with access to the internet and the help of our forum brethren (as we may not understand law) we can get to the right information.
Agreed.
I still don't get how the Rs 5000 limit has gone viral.
I hope such misconceptions have got clarified on this thread.


MODS: CAN you please add the first URL and the first quoted paragraph of this http://www.team-bhp.com/forum/shifti...ml#post3122996 (The LBT: Local body tax Fiasco) to the FIRST POST of this thread. At least that would put a lot of us in the correct perspective, instead of just believing the hearsay.

Last edited by alpha1 : 20th May 2013 at 17:26.
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Old 20th May 2013, 18:22   #67
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Default Re: The LBT: Local body tax Fiasco

Here is an article by a CA on taxguru.in. His main point is instead of LBT, how the tax component could have been linked with VAT. The article contains some details of this viewpoint.

Also according to this article, the Govt has gone back on their word that with introduction of VAT they will do away with all other taxes.

http://taxguru.in/goods-and-service-...harashtra.html
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Old 21st May 2013, 13:04   #68
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Default Re: The LBT: Local body tax Fiasco

What I understand by the local body tax (LBT) is, that BMC wants a separate revenue stream to collect revenues in place of Octroi. So additional to value added tax (VAT) traders/manufacturers/consumers will have to fork in additional tax called as LBT from now on.
If this LBT replaces Octroi, that means that the additional cost to the customer should be NIL. Since he/she was paying money for Octroi anyways.

Now why are the traders protesting so much? Lets try and figure out the true reason. 6/10 trucks passing the Mumbai Octroi Naka used to get through them 'without' paying for Octroi, either by collusion with the corrupt Octroi agents/pimps/touts/officials or by simply using alternate/bypass roads, or by loading goods in smaller vehicles like private cars and running through the border.
Also since computerized inventory was never required, the seller used to always undervalue his goods and always show less sales, hence pay lesser income tax. Now that its imperative he mantain a computerized log of all his sales, and can be cross examined by any inspector, he is forced to declare full value for his inventory and hence pay more income tax.

The corrupt traders have got used to operating in black money/cash and not paying taxes with impunity, hence any cleanup of the system is met with same old bogeys of increased prices and fear of harrasment etc.
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Old 21st May 2013, 14:10   #69
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Default Re: The LBT: Local body tax Fiasco

I have been hearing from different people that some concessions may be given unofficially so that the strike will be called off. Face saving for the traders who are losing a lot of money by keeping shutters down. Also face saving for the government in its own way I guess?

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Originally Posted by apachelongbow View Post
The corrupt traders have got used to operating in black money/cash and not paying taxes with impunity, hence any cleanup of the system is met with same old bogeys of increased prices and fear of harrasment etc.
You know what would really get their goat? If the taxes were back computed based on sales submissions and tax reccovered for last 10 years when they have been evaded.
Just kidding, I know its not going to happen.
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Old 22nd May 2013, 16:20   #70
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by scopriobharath View Post
Question 1: Is it good to assume that the shops would maintain even address info of consumers? I mean how would the Govt knock at my door? So this translates to the fact that I need to show a local address proof whenever i make a purchase, whether it is a matchbox from a local provision shop or a million rupee car.
I highly doubt that would ever happen over trivial stuff like a soap or matchbox.

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Originally Posted by scopriobharath View Post
The above leads to multiple questions on how temporary visitors would be handled. What if one is staying in Mumbai for say a week in a hotel or someone is visiting a relative in Mumbai. Secondly, should we carry a copy of address proof to be shown at each and every retailer.
The trader would be expected to have contact addresses for all dispatches.

Quote:
Originally Posted by scopriobharath View Post
Question 2: If i drive down to Daman & Diu and bring back a Samsung Tablet for 35200 (40,000 in mumbai incl taxes) how should this scenario be handled.

Scenario 1: How will be govt know i have brought it in? Will the govt raid any house and seize anything without a bill / LBT proof?
That is the authority the civic body will be loading its officials with, just about any object can be questioned. And you must possess a bill for each purchase to prove yourself correct.

Quote:
Originally Posted by scopriobharath View Post
Scenario 2: If i want to pay the LBT voluntarily, could i walk upto some place / govt agency and pay up the LBT as an individual ?

Scenario 3: If i buy a second hand item from Quikr.com, assuming that LBT is already paid on that item, should i pay LBT Again, just because it is changing hands (Similar to Income Tax).
I'm assuming there would be a procedure for paying lbt on personal belongings brought into one city from another.
If the product is moving fro one civic limit to another, there mostly would be a local body tax levy on the same. If it is just changing hands between the same civic body limit, no excess levy would be applied.

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Originally Posted by apachelongbow View Post
If this LBT replaces Octroi, that means that the additional cost to the customer should be NIL. Since he/she was paying money for Octroi anyways.
In Navi Mumbai, Cess charged at 1% has been replaced by LBT which is charged at 4%, costs for most goods in Navi Mumbai have already risen. Diesel was 58.84 when I tanked up last night. So costs in regions that were not inside Octroi limits have indeed risen, very contrary to the common disbelief of the average consumer who presumed he / she would not be affected.

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Originally Posted by apachelongbow View Post
Now why are the traders protesting so much?
Because the government has been teasing the trading / industrial community with a removal of octroi as has been the case all over the country besides Maharashtra, but now finally when they have got around to abolishing it, they have introduced LBT. Before we argue / put our views down any further, why does it seem commercially correct on the Maharashtra State Govt's part to not do away with these terribly old entry taxes?


Quote:
Originally Posted by apachelongbow View Post
Lets try and figure out the true reason. 6/10 trucks passing the Mumbai Octroi Naka used to get through them 'without' paying for Octroi, either by collusion with the corrupt Octroi agents/pimps/touts/officials or by simply using alternate/bypass roads, or by loading goods in smaller vehicles like private cars and running through the border.
Do you have any data to back your claims, or is 6 / 10 just a short in the dark? If there are trucks that do pass the Octroi Naka without paying duty, it is obviosuly due to an understanding with the then active officials. Those are government's representatives, and purely their responsibility too. The government should first clean up its own units before calling the traders names. If the govt. representatives are clean, there would be no chance of any free movement like you have said. Also, 50% of those free movement vehicles are in good possibility owned and run by local politicians who will yet again not be filing an LBT returns either. The only people who will really come under the knife would be the clean traders / mfrs / industrial units, and that too for no good reason.

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Originally Posted by apachelongbow View Post
Also since computerized inventory was never required, the seller used to always undervalue his goods and always show less sales, hence pay lesser income tax.
Sir, you are in 2013, I do not know where you've been shopping from but almost all retailers / wholesalers, heck even hardware shops in Mumbai, Thane and even Navi Mumbai who have one computer educated individual in the shop already have computerized books.
Those who do not have their data computerized are the smaller establishments who will still stick the hand written hissab as they may consider it way too tedious to learn computing on a PC as it may be a change in major habit for them. So this computerization because of LBT is clearly a myth.
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Old 22nd May 2013, 18:12   #71
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Default Re: The LBT: Local body tax Fiasco

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Originally Posted by manson View Post
Because the government has been teasing the trading / industrial community with a removal of octroi as has been the case all over the country besides Maharashtra, but now finally when they have got around to abolishing it, they have introduced LBT. Before we argue / put our views down any further, why does it seem commercially correct on the Maharashtra State Govt's part to not do away with these terribly old entry taxes?




Do you have any data to back your claims, or is 6 / 10 just a short in the dark? If there are trucks that do pass the Octroi Naka without paying duty, it is obviosuly due to an understanding with the then active officials. Those are government's representatives, and purely their responsibility too.


Sir, you are in 2013, I do not know where you've been shopping from but almost all retailers / wholesalers, heck even hardware shops in Mumbai, Thane and even Navi Mumbai who have one computer educated individual in the shop already have computerized books.
Govt has the right to tax to increase its revenue. The correct way to protest a tax is go to court, not stand on the streets and perform a strike. No sympathies for the traders here. As it is, the court ruled in favor of the govt.

If the clean traders are clean, why should they bother? If I pay my taxes in time and have my books in order who do I have to fear? Do employees fear the tax man after paying income tax?

The issue Sir, is bypassing octroi by the trader. Not if he pays TDS or not or VAT or not, those mechanisms are in place. Currently there is no way to track if goods entering the city have paid octroi or not. With LBT there will be active tracking. Hence this hungama.
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Old 22nd May 2013, 18:27   #72
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Default Re: The LBT: Local body tax Fiasco

Octroi is a stupid tax from the bygone era. As of today, it exists only in 2 places in the whole world - Maharashtra and Egypt. Let it be fully removed and no alternative established. Let Govt cut down it's expenditure correspondingly.
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Old 23rd July 2015, 11:51   #73
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Default Re: The LBT: Local body tax Fiasco

A toothless version of Local Body Tax is supposedly underway in the 15 'D' category Municipal Corporations of Maharashtra.

It is proposed by the State Government to not to completely abolish the notorious tax, but to exempt traders, whose business is less than Rs 50 crore. This new version may be brought into effect from 1st August, 2015.
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