It seems the arrogance of the government simply refuses to die! Inspite of being witness to one of the largest mass movements over the last 4-5 days by the business community in recent time, the government seems to be in no mood to show any empathy.
Octroi taxes have a respectable antiquity, being known in Roman times as vectigalia. It is in essence a tax levied on bringing commodities into a Local area/ district. As of 2013, Octroi is only levied in Ethiopia and in Maharashtra.
In order to abolish this cadaverous practice, the Government of Maharashtra decided to replace it with a tax supposed to be more robust and tax payer friendly. However certain draconian provisions seem to be inserted in the law give it the characteristic of a patent “Indian tax law”. This inevitably had to become the cause of stiff opposition from trading community. We have analysed some of these herein:
1. Coverage of one and all: Virtually almost anyone bringing in goods to the city is proposed to be brought under the ambit of LBT. Be it small/big traders, professionals, brokers, factors, agents, societies, club, etc or people carrying on temporary business; almost everyone shall be covered who makes purchases of Rs. 1,00,000/- in a year and brings in goods worth Rs. 5,000/-.
2. Issuance of bills & maintenance of records: LBT requires issuance of bills in case of any sales amounting to a meager Rs. 10/- or more, failing which penalty double the amount of bill maybe levied. Hence, expect a bill for even the smallest item from grocery store and fruits, vegetables, etc. Further requirement to maintain separate shall atleast help the accounting industry if no one else in wake of recession.Online GST Certification Course by TaxGuru & MSME- Click here to Join
3. Sweeping powers: Vide powers have been given to the Municipal officers including that to seize goods and stop any vehicle in transit, which can become a cause of harassment to traders.
4. Job work outside the city: Goods sent for job work/ processing outside the city should be received back without any change in appearance or condition; failing which LBT shall have to be repaid. What fails to appeal to a rationale mind is how processed goods shall appear the same as original!!
5. Payment of disputed appeal before appeal: The law mandates tax payer to deposit the entire amount disputed before filing an appeal. With the despicable disposal rate that Indian judicial system has it is only apropos for traders to ask for the provision to be watered down.
Further appeal only lies to officer within the department i.e. Deputy Municipal Commissioner/ Commissioner and needs to be filed within just 15 days.
6. Goodbye to delays: The interest rates prescribed for delayed payment of LBT are phenomenally high. It ranges from 2% p.m. for delay upto 1 year to 3% p.m. (36% p.a.) for delay of more than a year. Such high interest rates are only heard of charged from credit card companies!!
7. No credit mechanism: No mechanism for input credit of LBT paid has been prescribed which shall lead to cascading effect.
It’s not difficult to take a cue from the above that the law is indeed a draconian one for the trading community. This coupled with the fact of liasioning with one more department viz. Municipal officers under LBT is inevitably bound to give the traders a feeling of insecurity on account of corruption and inspector raj.
The only intent of the law seems to be to fill the coffers as it’s devoid of rationale. As has been mentioned by trading bodies, the opposition is not for payment of LBT but the way it is to be administered.
LBT being akin to VAT, the State can instead simply collect it alongwith VAT under a separate challan on behalf of the Muncipal Corporation and remit it to the Corporations internally. Knowing however the red-tapism and bureaucratic set-up we live in, it is too much to ask the government to make matters simple by exerting the government machinery a tad more!!
It is not out of context to remember Benjamin Franklin saying “The only things certain in life are death and taxes.” We can only hope that that its not too soon that we bid adieu to our local kirana stores!!
(The author, Ashish Kedia, is a Chartered Accountant and is a Partner at A V Kedia & Associates, Mumbai. He can be reached at firstname.lastname@example.org)