LBT has the dubious distinction of one of the most badly written, implemented and followed laws of India. And law makers and law followers both are responsible for messing up this law. Law should have been drafted only after discussion with various stakeholders like Assessees, Field Staff , Tax Consultants , Consumers etc. But in case of LBT all these discussion were post implementation and still going on.
New Maharashtra Government before and after coming into power promised to abolish LBT. But the promise still remains unfulfilled. Although w.e.f. 01.08.2015 for most of the assesses LBT stands abolished but the amendment notification has given rise to many doubts and confusions .
Before listing the concerns and confusions first read the amendments in Rule 3 and 17.
In Rule 3 ( regarding limits of turnover for Registration ) sub rule (1) the following shall be added :
(a) “Provided that for any period starting on or after 1″ April 2015, the dealer whose turnover of sales or turnover of purchases, DURING ANY YEAR, is not less than 50 cr. shall only be liable for registration.” (w.e.f. 01-08-2015)
Rule 17 ( regarding Cancellation of Certificate of Registration ) sub rule (1) , for clause (b) , the following sub clause shall be substituted :
(b) neither the turnover of sales nor the turnover of purchases of a registered dealer, during the year prior to the year starting on 1” 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.
This means that :
1. If in any year ( assuming it as previous year ) turnover of sales or purchase is more than 50 crores dealer shall be liable for LBT.
2. If turnover in any year was not more than 50 crores , then in financial year 2015-16 till the dealer’s turnover crosses 50 crores , he is not liable to LBT. And if turnover crosses 50 crores he will be liable to LBT only on turnover exceeding Rs.50 crores.
3. In any case turnover between 01.04.2015 to 31.07.2015 will be liable to LBT.
4. If turnover is below 50 crores the registration certificate shall be deemed to have been cancelled with effect from 01.08.2015. However if turnover crosses 50 crores (after 31st July 2015 ) during the financial year 2015-16 dealer has to again apply for registration.
Issues , Concerns and confusions arising out of Amendment Notification ( partial abolition)
1. Which turnover will be considered for levying of LBT. Whether turnover within a municipal corporation or total turnover of an entity? If total turnover is considered then it may include turnover outside the corporation limits also.
2. LBT is levieble on import of goods in a municipal corporation. So whether 50 crores turnover includes local purchase / sales also?
3. For example an entity has a turnover of Rs.25 crores in Nagpur and 30 crores in Raipur, whether it will be liable to LBT?
4. Whether turnover includes sale/purchase of goods only?. If a pure service provider having no physical sales/purchase of goods having turnover over Rs. 50 crore, will he be liable to LBT?
5. From where figure of turnover will be arrived at ? Financial statements will give total turnover of all branches, whether for LBT purpose turnover of a branch will be considered or of all branches taken together?
6. A Hospital’s turnover may be above 50 crores . But it does not trade in goods. So if it imports an equipment whether it will be liable to LBT?
7. Whether 1% LBT is discontinued on Registration of real estate transaction?
8. Whether dealer is not required to apply for cancellation of Registration?
9. Whether Builders will be required to pay LBT at the time of sanction as being done before abolition?
10. What will be the status of LBT already paid ( under composition scheme ) at the time of sanction of scheme ? Whether they can claim proportionate refund for unconstructed portion?
11. It will bring great disparity in marginal cases. For example there are 2 entities in same line of business. Dealer A was having a turnover of 51 crores in previous year and Dealer B was having a turnover of Rs.48 crores. Dealer A will be liable for LBT and Dealer B will not. How Dealer a can sustain as his cost is going to be increased by LBT rate?
12. There is no reduction in petroleum products as Petroleum Companies are paying LBT in advance irrespective of who is owning the Pumps. A petroleum Dealer if his turnover is below 50 crores should not be liable to LBT. Then only consumers can reap benefits of LBT abolition.
There are many such issues , doubts in the minds of General Public. State Government should come out with a detailed Clarification/ FAQ on these matters so that general public can get the benefit of LBT partial abolition. Till then “ Apni Dafli Apna Raag “..!!!
(Author is a Past Chairman-Nagpur Branch of ICAI and is a Practicing Chartered Accountant and can be reached at firstname.lastname@example.org)