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30 FAQ’s on LBT Exemption in Maharashtra

Please find below a compilation of queries received by us in response to Notes related to LBT Exemption put up on our website along with related opinions from our side . While care has been taken to comprehend the issue alongside applicable legal provisions, it is submitted that considering the fact of frequent changes in LBT laws and likelihood of issuance of further clarifications by the Authorities, users of information published in this FAQ should note that the opinions expressed do not constitute legal advice and users are therefore advised to refer the matter to us for personal interaction about all aspects of the issue involved.

CA Mukund Abhyankar

Please find below a compilation of queries received by us in response to Notes related to LBT Exemption put up on our website along with related opinions from our side . While care has been taken to comprehend the issue alongside applicable legal provisions, it is submitted that considering the fact of frequent changes in LBT laws and likelihood of issuance of further clarifications by the Authorities, users of information published in this FAQ should note that the opinions expressed do not constitute legal advice and users are therefore advised to refer the matter to us for personal interaction about all aspects of the issue involved.

1. Whether only prospective TO shall be applicable for LBT or the full TO incl. The first 50Cr also?

Answer:-

Turnover limit of Rs.50cr is based on last year’s turnover within the same corporation limits. If the turnover has exceeded Rs.50 crores in previous financial year then, the liability towards LBT in next financial year shall be from Re.1/- of turnover. However, if turnover during a previous financial year did not cross Rs. 50 crore then liability towards LBT in next financial year will arise only in respect of turnover above Rs.50 crore. Accordingly , for first year of operations, turnover upto Rs.50 cr within same corporation limits will be exempt. (Section 152B)

2. Our company is having group turnover of 58Cr. for total 7 plants of these 2 plants are out side of corporation limit and having turnover of approx 18Cr.

i) Earlier we were purchasing good from local LBT registered dealers so no need to pay LBT on that material . Now what is scenario from local purchases?

ii) Do we require to pay LBT on that outside corporation plants also?

Iii) Whether turnover of all plants is to be considered for LBT?

Answer:

i. LBT is payable only on purchases made from outside corporation limits. Hence, no LBT is payable on purchases made from local dealers within the same corporation limits.

ii. LBT is not required to be paid on purchases made at plants outside corporation limits.

iii. As per the clarification, limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State.

3. i) What is a year as per LBT?

ii) Whether Turnover of Services to be considered for LBT Turnover limit?

Answer :-

1. Any year means Financial Year i.e from April to March

2. Turnover limit is to be considered for Sale or Purchase of Goods only & turnover of services are not to be considered for the turnover limit.

4. Whether LBT is to be paid on direct imports into the city by a buyer or also on purchase made by him from a local dealer?

Answer :

LBT is applicable to goods brought inside the limits of respective Municipal Corporation for,

a. Consumption

b. Use

c. Sale

According to this , LBT will be required to be paid by the dealer who imports the goods from outside the Municipal Corporation into his corporation. Purchases made from a local dealer within the same corporation limits is exempt from LBT.

5. I am having factory at one location and works contract at more than one Iocation , hence I would like to know whether the limit of Rs. 50 Cr. is applicable to each Municipal area and not on total TO of Municipal Area covered in LBT?

Answer :-

As per the clarification limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State as thought earlier.

In simpler terms this means that if an entity does not have sale or purchase of goods more than Rs. 50 Cr in a particular city then there will not be any LBT liability for that entity in that city. This clarification is thus a great relief for all.

6. We are builders and have projects. In such case we require clarification on following points:

a) Whether the turnover limit of Rs. 50 Crore is applicable for Thane city?

b) IF yes, whether we have to pay LBT on behalf of suppliers who have surrender their LBT No. ?

Answer:

LBT is applicable in entire Maharashtra except Mumbai Corporation. Thus, LBT is applicable in Thane .

LBT is applicable to goods brought inside the limits of respective Municipal Corporation for,

a. Consumption

b. Use

c. Sale

Hence, if your Turnover of purchases or sales within Thane Municipal exceeds Rs.50 cr, then you will be required to pay LBT on all purchases made by you from outside Thane corporation.

7. We have been registered under LBT since last year i.e. F Y 2014-15. Our nature of business is Interior Contractors and we have been awarded a contract for that we have been supplying goods from other states. We have paid LBT upto 31-July-2015. According to notification we are liable to pay LBT upto 31-07-2015 as our Turnover/purchase have not crossed Rs 50 crore in F Y 2014-15. Our client is still forcing us to pay LBT, Whether It is applicable to us?

Answer:

Maharashtra Government has recently announced its decision to exempt business organisations having turnover below Rs. 50 Crores from the levy of LBT. LBT is payable by the purchaser of goods bringing from outside Municipal Limits of a corporation.

Hence, your client in no way can force you to pay LBT, if you are exempt by the clarification of State Govt. of Maharashtra.

8. Whether sale of vacant land within municipal corporation area will get included in turnover for LBT in Maharashtra?

Answer :

LBT is applicable to goods brought inside the limits of respective Municipal Corporation for,

a. Consumption

b. Use

c. Sale

LBT is applicable on movable goods & not on immovable property. Hence, LBT will not be payable on sale of vacant land within municipal corporation area.

9. Our company is manufacturer of paint having its factory at Pune and the company does not have place of business in any municipal corporation in Maharashtra.The goods manufactured in factory is sold to dealers in various corporation in Maharashtra. We deliver goods to dealer through third party transporter. The company has taken registration of LBT for Pune and Pimpri Chinchwad corporation in 2013 to pay LBT on behalf of dealer ( This was more of business understanding) .Now non of our dealers turnover is more than 50 Crores across Maharashtra including PCMC and PMC where were registered. Do we need to continue to pay LBT?

Answer:

Maharashtra Government has recently announced its decision to exempt business organisations having turnover below Rs. 50 Crores from the levy of LBT. LBT is payable by the purchaser of goods bringing goods from outside Municipal Limits of a corporation.

Accordingly if your dealer is not having purchases or sales in a particular city for an amount more than Rs.50 crore in a financial year, he will not be liable to pay LBT.

10. Party A (turnover exceeding 50 Crore) with HO in Pune and warehouse outside Octroi/LBT Limits.  Party A ships material to Party B (turnover less than 50 Crore). My question: Is there any liability of LBT in the hands of Party A and Party B?

Answer:

Liabillity of Party A shall be in respect of purchases of goods made from suppliers situated outside Pune & goods brought in Pune.

Liabillity of Party B will arise only if local turnover of purchases or sales within a city area is more than Rs.50 crore, which is not the case according to the facts submitted by you. Hence there will not LBT liability for party B.

11. Would like to have clarification on following :-

i) We have one unit under LBT territory and another in NON LBT territory if we look at the turn over as per MVAT we are above 50 crs but in this, our LBT territory unit contribute only Rs 12 Cr and non LBT territory unit itself Rs 80 crs so putting together it shall exceeds Rs 50 cr limit should under this scenario out LBT territory unit shall be still applicable to pay LBT ?

ii) Has so far got any clarification on definition of turnover of sales and purchase under LBT amendments is within LBT ZONE or Pulling all together Maharashtra Sales or purchase ?

iii) As this effect is taken from 01.08.2015 so would it be needed to take fresh registration again as old registration cancelled under deemed registration cancellation ?

iv) For the period April 15 to July 15 LBT has to be paid or not ?

Answer:

i) Maharashtra Government has recently announced its decision to exempt business organisations having turnover below Rs. 50 Crores from the levy of LBT. LBT is payable by the purchaser of goods bringing goods from outside Municipal Limits of a corporation. Accordingly, as per your explanations LBT will not be applicable in your case.

ii) As per the clarification limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State as thought earlier.

In simpler terms this means that if an entity does not have sale or purchase of goods more than Rs. 50 Cr in a particular city then there will not be any LBT liability for that entity in that city. This clarification is thus a great relief for all.

iii) Turnover limit of Rs.50cr is based on last year’s turnover within the same corporation limits.

If the turnover has exceeded Rs.50 crores in previous financial year then, there is no need to take fresh registration, because in such a case registration is not deemed to be cancelled w.e.f. 1.8.15

However if the same has not crossed the basic limit in previous financial year then the same will be deemed to be cancelled. You will have to apply for fresh registration in case your turnover with one municipal corporations exceeds Rs.50 Crore at any time during the current FY i.e. 2015-16.

iv) As there is ambiguity with respect to the period April to July-15, it is advisable to pay LBT for such period .

12. I have two question to ask :–

i) If gross tunover is Rs.90 Crores but Sale in Maharashtra is Rs.7 Crores and Purchase in Maharashtra is Rs.41 Crores ,can we take advantage limit of Rs.50 Crores ?

ii) If goods are purchased from local dealer who was earlier under LBT ,shall I have to pay LBT on such local purchase?

Answer:

i) Where an organization carries on business of buying or selling in a city covered under LBT and where turnover of purchases or sales made by such organization in that city is more than Rs. 50 Cr., then such organization shall be required to register itself in that city and pay LBT on the purchase turnover for that city as per provisions of charging section 152 B. Accordingly, you can avail the advantage of Rs.50 crore exemption limit.

ii) LBT is payable only on purchases made from outside corporation limits. Hence, no LBT is payable on purchases made from local dealers within the same corporation limits.

13. If ABC Co.is having two different unit ABC unit-I & ABC unit-II and turnover of ABC unit-I is 60 cr and ABC unit-II is 20cr and total turnover of company is 60+20=80cr then whether ABC unit-II liable for LBT ?

Answer:

Maharashtra Government has recently announced its decision to exempt business organisations having turnover below Rs. 50 Crores from the levy of LBT. LBT is payable by the purchaser of goods bringing goods from outside Municipal Limits of a corporation.

In your case, if the turnover of both units are situated in different municipal corporation limits then, LBT will be payable by Unit-A only , but if both the units are situated in same municipal corporation limits , then LBT will be payable by both the units.

14. i) I have one doubt – The notification says that they are draft rules. Whether a subsequent notification issued ?

iii) Could you please provide copy of notification which states that there is no need to apply for cancellation of LBT since the cancellation would be automatic.

Answer:

i) A clarification has been issued recently by Maharashtra Government decision to exempt business organisations having turnover below Rs. 50 Crores from the levy of LBT.

ii) Amendment is made in Rule 17 which deals with cancellation of certificate of registration. Accordingly for clause (b) in sub-rule (1), of rule 17 of the Principal Rules, following sub-clause has been substituted, which now provides for deemed cancellation of registration of all dealers having turnover limit below Rs. 50 Cr in the preceding financial year. Substituted provision of Rule 17 (1) (b) reads as follows.

Rule 17 (1) where

(b) “neither the turnover of sales nor the turnover of purchases of a registered dealer, during the year prior to the year starting on 1st April 2015 has exceeded rupees 50 Cr. then, the certificate of registration of such dealers shall be deemed to have been cancelled with effect from 1st August 2015.”

15. If my business is spread in multiple states(branches), then for calculating the turnover exemption, turnover of all the states should be taken into consideration or only Maharashtra. For e.g, turnover in Maharashtra is Rs. 25 Cr & turnover of Gujarat is Rs. 30 Cr, then whether I am liable to LBT ?

Answer:

As per the clarification limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State as thought earlier.

In simpler terms this means that if an entity does not have sale or purchase of goods more than Rs. 50 Cr in a particular city then there will not be any LBT liability for that entity in that city. This clarification is thus a great relief for all.

Accordingly, as per the facts provided by you, LBT will not be applicable in your case.

16. My client is having branches in different cities in Maharashtra where LBT is applicable in each city under its respective jurisdiction however individually the turnover doesn’t exceeds Rs.50.00 Crores , but when consolidated all the branches, the turnover exceeds Rs.50.00 crores. Will LBT applicable and if yes will all the branches have to pay LBT?

Answer:

As per the clarification limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State as thought earlier.

In simpler terms this means that if an entity does not have sale or purchase of goods more than Rs. 50 Cr in a particular city then there will not be any LBT liability for that entity in that city. This clarification is thus a great relief for all.

Accordingly, as per the facts provided by you, LBT will not be applicable in your case.

17. We have one query regarding the recent amendment notification on turnover based exemption in case of LBT in Maharashtra :-

In one of our group entities, the sales turnover exceeds Rs.50 cr and therefore based on the recent notification, registration for the purpose of LBT is deemed to be continued. However the purchase turnover may not exceed Rs.50 cr in 2015-16. In such a scenario should we stop paying LBT from August 2015 till March 2016. Please clarify

Answer:

Turnover limit is to be considered for Sale or Purchase of Goods within same corporation limit. In your case, sales turnover is exceeding the basic exemption limit of Rs.50 crore. Hence, you will be required to pay LBT on your purchases of goods in that city even though the purchase turnover is below the prescribed turnover limit.

18. We are manufacturers of Transformer, having Units in Thane City, Rabale & Digha in Navi Mumbai,(LBT APPLICABLE AREA) . We are registered with Navi Mumbai & Thane Municipal Corp. for LBT and we are also having unit at Kalyan ( Murbad ) which is LBT Free area. Our Turnover & purchase for all 3 LBT registered units are less than 50 crores, but combining Kalyan ( Murbad) unit turnover, it crosses 50 crores.

Please let us know whether we are eligible for LBT for 3 units having turnover in each city less than 50 crores?

Answer:

As per the clarification limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State as thought earlier.

In simpler terms this means that if an entity does not have sale or purchase of goods more than Rs. 50 Cr in a particular city then there will not be any LBT liability for that entity in that city. This clarification is thus a great relief for all.

This will also result in exemption from LBT from units in Thane City, Rabale & Digha in Navi Mumbai,as turnover in each of these cities does not exceed Rs.50 Crores.

19. I have doubt regarding LBT, one of my clients who is having overall turnover of Rs.75.00 Crore during financial year 2014-15 his turnover at Nagpur under MVAT is Rs.33.00 Crores and rest of Rs.42.00 Crores are from his establishments at Madhya Pradesh for which every month VAT & Entry Tax is being paid. Please explain whether this establishment will be covered under LBT or Not?

Answer:

As per the clarification limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State as thought earlier.

Accordingly in your case, turnover of Nagpur only , shall be considered for the purpose of LBT. As the turnover from Nagpur is less than Rs.50 crore, LBT will not be applicable to you.

20. Our factory is out of PCMC limit ( Markal – Alandi ) and our turnover from our Factory is above 50 crores . Our head office is in PCMC limit. We have purchased required material as office stationery amounting to Rs. 50,000/-P.M. Can we pay the LBT on stationery purchase at our Head Office..

Answer:

Every Dealer whose turnover either of all sales or of all purchases in the city covered under LBT has exceeded pr exceeds the relevant limit prescribed in this behalf shall be liable to pay the LBT.

Accordingly, H.O will be exempt from payment of LBT as the purchase of goods by H O is below Rs.50 crore.

21. At present we are considering our sale price workings of Motor cars and parts in the State of Maharashtra by considering the LBT paid by them. Kindly inform us the effect of this notification i.e., whether LBT is not payable by Dealers  or Dealer whose turnover is above 50 Cr alone have to pay LBT?

Answer:

Every Dealer whose turnover either of all sales or of all purchases in the city covered under LBT has exceeded pr exceeds the relevant limit prescribed in this behalf shall be liable to pay the LBT.

Accordingly, only those dealers whose turnovers within any city covered under LBT is less than Rs. 50 Cr. Would need to be compensated for LBT

22. Whether in case of job work where the material received inward for job work process is exceeding more than Rs. 50 crs will it be covered under LBT. As per books there is no purchase sales transaction

Answer:

Treatment for Job Work:

a. Where a dealer receives the goods from outside the corporation limits for undertaking specified processes and the processed goods are sent back to the same party within six months then he is not liable to pay LBT subject to conditions.

b. As per Rule 3, where a dealer moves goods outside the city for carrying out the specified processes and re-imports the same within six months without effecting any change in the product then LBT shall be leviable only on the value addition i.e processing charges, transfer charges ,etc. during the processing.

c. The dealers engaged in job work receiving the goods from outside the limits of corporation are required to maintain the records as prescribed in return Form E-I & E-II.

However it is opined that if turnover threshold is not crossed by a Job Worker, he shall not remain liable for registration under LBT and accordingly will not be required to follow the compliances for job work specified under LBT Rules.

23. Will the sale turnover will include  Services ? ,

Answer:

Turnover limit is to be considered for Sale or Purchase of Goods only & turnover of services are not to be considered for the turnover limit.

24. We are carrying a retail trade online business based in Gurgaon. If our online retail sale is more than Rs 50 Cr in particular city of Maharashtra to end customers then as per new provision whether LBT is applicable on us or not?

Answer:

LBT is applicable to goods brought inside the limits of respective Municipal Corporation for,

a. Consumption

b. Use

c. Sale

According to this , it is opined that LBT will not be applicable in your case, as LBT is required to be paid by the dealer who imports the goods from outside the Municipal Corporation into his corporation.

This however is subject to the condition that your online sale logistics does not involve warehouse within city limits through which actual deliveries are made for the goods.

25. As per your article it seems you are of the view that the turnover of purchases (perhaps not sales) effected in the state of Maharashtra, on the whole needs to be considered by a company, for ascertaining as to whether the same exceeds the threshold limit of Rs. 50 crs. Thus, if the turnover of purchases in a few local municipal authorities may not be exceeding Rs. 50 crores individually, but cumulatively may be exceeding the said limit of Rs. 50 crs. and in which case such company becomes liable to pay LBT in all 25 territories.

Shall appreciate your confirming the above views at your earliest.

If yes, any further supporting evidence such as clarification from the LBT officer or from any other expert / govt. officer, etc..,

Answer

It appears that you have referred to First Article in the series which was published on the website before the clarification regarding definition of Turnover was issued by the Government.

As per the clarification limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State as thought earlier.

In simpler terms this means that if an entity does not have sale or purchase of goods more than Rs. 50 Cr in a particular city then there will not be any LBT liability for that entity in that city. This clarification is thus a great relief for all.

26. Regarding levy of LBT if the dealer is a new incorporation and started the business from 01/04/15 and if its turnover exceeds in current Financial year Rs 50 cr then whether he is liable for LBT after taking exemption of Rs 50 cr i.e. after Rs. 50 cr or he has to pay out of his pocket on 1st Rs. 50 cr or he will liable only after Rs. 50 cr. ,

Answer:

Turnover limit of Rs.50cr is based on last year’s turnover within the same corporation limits. If the turnover has exceeded Rs.50 crores in previous financial year then, the liability towards LBT in next financial year shall be from Re.1/- of turnover. However, if turnover during a previous financial year did not cross Rs. 50 crore then liability towards LBT in next financial year will arise only in respect of turnover above Rs.50 crore. Accordingly , for first year of operations, turnover upto Rs.50 cr within same corporation limits will be exempt. (Section 152B)

27. We have administrative offices in cities where LBT is applicable viz. Pune, Nagpur etc. and the warehouses are located outside the municipality area where actual purchase or sale of goods take place. All the invoices of purchase and sales carries address of our warehouse where actual delivery takes place along with administrative office address. Our administrative offices does not cross the basic threshold limit where as our warehouse which is situated beyond the municipality limit cross the turnover of purchases Rs.50 crores. As a precautionary method we have already registered our administrative offices under LBT and was paying tax on any purchases in office.

My queries are :-

i) Whether we are liable to make payment of LBT for our warehouse as well as for administrative offices?

ii) Whether our registration of administrative office will be cancelled automatically?

iii) Any obligation which we may required to face in future?

Kindly request you to please guide us how to tackle the above situation ?

Answer:

As per the clarification limit of Turnover at Rs.50 crores is to be considered separately for each city in which entity has business operations and not collectively for all places of business operated in Maharashtra State as thought earlier.

i) In your case, all the clearances are made from your warehouse which is outside the municipal corporation limits. Hence, LBT will not be payable for clearances from LBT.

As the turnover of administrative office is below the exemption limit, LBT will not be payable on the same.

ii) Amendment is made in Rule 17 which deals with cancellation of certificate of registration. Accordingly your registration for office premises will get cancelled applying previous year turnover criteria.

28. I have booked a car from XYZ motors in Mumbai.I am myself from Mira Road and fall under Mira Bhayander Municipal Corporation. Should I pay LBT for this car purchase to the dealer. At this point everyone is confused , including my dealer. So if I pay, will I be able to get refund later if LBT was not required?

Answer:

LBT is payable only on purchases made from outside corporation limits. LBT is payable by the Car dealer situated in Mumbai, if he effects delivery from his showroom in that city. If he effects delivery from his premises outside city limits directly at your address then dealer will not be required to pay LBT on your car because he will show the car so sold to you as out of the lot purchased at such premises outside the city.

29. Consequent to the amendment w.e.f 1st August 2015, will Dealers below the threshold limit of 50 cr. be categorized as ‘Registration Exempt Dealer’ or will they be an “Unregistered Dealer” in Terms of rule 20 of LBT Rules?

Answer:

Amendment is made in Rule 17 which deals with cancellation of certificate of registration. Accordingly for clause (b) in sub-rule (1), of rule 17 of the Principal Rules, following sub-clause has been substituted, which now provides for deemed cancellation of registration of all dealers having turnover limit below Rs. 50 Cr in the preceding financial year. Substituted provision of Rule 17 (1) (b) reads as follows.

Rule 17 (1) where

(b) “neither the turnover of sales nor the turnover of purchases of a registered dealer, during the year prior to the year starting on 1st April 2015 has exceeded rupees 50 Cr. then, the certificate of registration of such dealers shall be deemed to have been cancelled with effect from 1st August 2015.”

As regards your query about status of dealers whose certificates are deemed to be cancelled w.e.f. 1.8.15, there is no separate category specified in the LBT provisions for such dealers. Accordingly such dealers shall be treated as Unregistered Dealers for the purposes of LBT.

Rule 20 of LBT Rules relates to purchases made by Registered Dealer from another Registered Dealer and does not cover cases of purchases of URD.

30. Whether car purchased from other states into Maharashtra Municipal corporation limits liable for LBT?

Answer:

LBT is payable only on purchases made from outside corporation limits for business purposes and that too if Turnover limits are crossed, which may not be the case in the facts mentioned by you.

View Comments (8)

  • I stay in Thane. I am planning to buy a car who is outside Thane corporation. Eg: Vashi. Do I need to pay LBT in this case. Or shall I go to dealer in Thane. Dealers in Thane are asking for LBT.

  • is there GR LBT exemption for purchase turnover less than 50 crores. can we get is or from were will we get

  • If I purchase a car from Aurangabad and registered in Jalgaon RTO, do I need to pay entry tax. I am a retired person and I am going to use it for personal use.

  • hello,
    i bought a car honda amaze at kolhapur in may2014
    which was registerd at sangli rto in may 2014.Both sangli and kolhapur corporations wereLBT areas then.No lbt was charged to me then by dealer or muncipal corporations
    recently sangli corporation has sent me a notice to pay LBT on it.As an individual user am i liable to pay LBT on it?

    • Yes you are Liable. Your Car Dealer must have taken a declaration from you that you will pay the LBT by yourself.

  • We are Education Trust register under Bommbay Public Trust Act & also we getting exemption from Income Tax U/s 12A. Our main object of trust is advancement of education. Whether we are applicable for LBT pls advise

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