1. What is Local Body Tax?
Local Body Tax is a tax on entry of goods within municipal limits (aria). LBT has been introduced in place of Octroi.
LBT was already operational in the city of Aurangabad, Kolhapur, Jalgaon, Nanded, etc. Starting 1 April 2013 it has been introduced in Thane, New Mumbai, Pune, Pimpri Chinchwad, Nagpur, etc.
LBT is governed by provisions of Maharashtra Municipal Corporation Act, 1949 (the Act) and Bombay Provincial Municipal Corporation (Local Body Tax) Rules, 2010 (LBT Rules).
Any dealer who brings goods into city limits for use, consumption or sale therein is liable to pay LBT. The term 'dealer' has been defined in the Act.
3. What is the taxable event under LBT?
Entry of goods in the city limits for use, consumption or sale therein is the taxable event under LBT.
The term 'City' has been defined in the Act and would ordinarily conform to the municipal corporation limits.
4. What are the rates of LBT?
Rates of LBT are given in Schedule A Group - I to III and vary from city to city. For example, in Thane the rates of LBT range between 0.10 percent to 7 percent.
Schedule B, provides list of goods which are exempt from LBT like agricultural implements, cereals, specified food products, specified textile items like khadi, etc. Schedule B is common among all the cities where LBT is applicable.
5. What are the registration limits under LBT?
All dealers whose turnover of sales / purchases exceeds the threshold limit need to obtain registration
Threshold limit are as follows:
- In the case of a dealer, who is an importer and the value of all the goods imported by him during the year is not less than Rs.1,00,000/-
- In any other case, including the case where a dealer has not become liable to pay local body tax under clause (a), and the turnover of all his sales and purchases during such year, is not less than Rs.5,00,000/-
- Notwithstanding anything contained in sub-rule (1), if a dealer or a person not carrying on a particular business in the City on a regular basis, carries on business in the City in any year on temporary basis, then he shall be liable for temporary registration under the provisions of the Act and these rules, whether or not he is liable under sub-rule (1) of this rule.
Further, every person liable to obtain registration is required to make an application for registration in Form-A.
Every dealer who is registered in terms of Maharashtra Value Added Tax Act, 2002 on appointed day is deemed to be registered for the purposes of LBT.
6. Would a person selling goods from outside a local area
require to register?
If a person sells goods from outside city limits then the recipient of the goods in the city would be liable to obtain registration if he satisfies the criteria for liability and registration.
7. On what value LBT Is payable?
The LBT regulation does not explicitly provide for value on which LBT is required to be paid.
Rule 24 provides for determination of tariff value by the Commissioner in case of certain goods.
Whereas, Rule 25 states that the Commissioner may determine the fair market price of goods if there are reasons to believe that sale price/ purchase price is less than the fair market value, in the specified different scenarios.
On perusal of aforesaid provision it appears that LBT is required to be paid on the invoice price charged in a particular transaction. However, there are no explicit provisions in this regard and this requires clarification from the authorities.
*An importer is a person who brings or causes to bring any goods in the limits of city from a place outside city for use,consumption or sale therein.
8. What are the due dates for paying LBT? What is the mode
LBT is payable on a monthly basis and should be paid within 20 days of the following month. The banks in which payment can be made and challan for payment of LBT is notified by each municipal corporation levying LBT.
9. If the seller - importer does not pay LBT, will the purchaser
LBT is tax on entry of goods within city limits. Therefore, primary responsibility of paying LBT vests with the dealer who brings goods into municipal limits. Therefore, it would be the responsibility of seller importer to discharge LBT in respect of goods he brought in the city limits for sale. If however, a person other than a registered dealer imports goods into the City limits and thereafter sells such goods to a registered dealer, then such registered dealer shall be liable to discharge LBT unless it is proved that these goods have already suffered LBT in that city.
10. Does a seller need to mention LBT registration number
on the Invoice?
In terms of Rule 21 and 22 of the LBT Rules, every bill / invoice / cash memo issued by the selling dealer should contain the following:
- full name and style of the business;
- address of the business place;
- LBT registration certificate number;
- particulars of the goods sold and the sale price thereof; and
- a certificate containing the following declaration:
”I/we hereby certify that my/our registration certificate under these rules is in force on the date on which the sale of the goods specified in this bill / invoice / cash memorandum, is made by me/us and that the transaction of sale covered by this bill / invoice / cash memorandum, has been effected by me/us in the course of my/our business."
Further, if the price of goods is INR 500 or more, then the dealer needs to mention in such bill / invoice / cash memorandum,the following details of the buyer:
- name and style of the business;
- buyer's address; and
- number of LBT registration certificate.
11. What are the due dates for filing return?
Annual return is required to be filed in form E-ll within 90 days from end of the year to which such returns relates duly singed by him or by person nominated by him in Form F.
Every registered dealer who is not an importer shall be required to file NIL return annually.
12. What records are to be maintained?
In terms of LBT regulation, every dealer is required to keep true account of value of goods imported, purchased, consumed or sold by him as prescribed. The dealer is also required to keep in his record a counterfoil / duplicate of bill/ invoice issued in respect of imported goods.
Further, as per Rule 19 of LBT Rules, every dealer is required to maintain a register of purchases and receipt of goods on transfer basis in Form D for each place of business.
The records are required to be preserved for minimum period of five years.
13. Are any exemptions / deductions available for determining
the LBT amount?
LBT regulations provide for full / partial exemptions in following cases subject to prescribed conditions:
- Goods imported into local area by / on behalf / on account of State or Central Government, belonging to such Government and meant for public purpose and not used I intended to be used to earn profit ;
- Goods exported out of India;
- Goods rejected and returned by the purchaser, within six months from the date of its export out of the local area;
- Goods sent and received for job work
14. Under what circumstances can a dealer / person opt for
Dealers having turnover less than rupees ten lakhs can opt to pay lump sum amount towards LBT based on the prescribed slab and following the specified procedures.
A separate composition scheme has been specified for builders and contractors.
15. Whether any composition scheme is prescribed for
builders & contractors?
As mentioned above, a composition scheme has been specified for builder or contractor undertaking construction within city limits.
In terms of the said scheme, the builders / contractors have an option to pay LBT as follows:
(a) Rs.100 per square meter for construction up to 4 floors (without lift) ;
(b) Rs.150 per square meter for construction up to 7 floors (with lift) ;
(c) Rs.200 per square meter for construction of high rise building (above 7 floors) ;
The contractor who opts for lump sum payment of tax may make the payment of Local Tax, in advance, to the extent of 50% of such amount due, on applying for grant of commencement certificate for such construction.
ANY dealer or person undertaking any work within the area of Municipal Corporation shall have the option of either paying Local Body Tax on the value of the goods imported into the limits of the City for undertaking such work or alternatively, paying the said tax on lump sum basis at 0.25% of their total amount of contract value.