CA Lalit Munoyat

For the information of all LBT registered Dealers in Maharashtra

As all the dealers are aware that the Urban Development Department, Government of Maharashtra has informed all the dealers that from 1st August 2015, LBT shall apply only to those dealers whose turnover would exceed Rs. 50 Cr. in a year.

In order to give effect to the above proposal, the Government of Maharashtra has vide its notification no. LBT- 2015/CR-47/UD-32. Dated -01-08-2015 amended the Maharashtra Municipal Corporations (Local Body Tax) Rules 2010 so as to set fresh limits for Registration and to provide for automatic Cancellation of Registration for the purposes of levy of Local Body Tax. The following amendments have been made w.e.f.1st August 2015.

Rule 3. The limits of turnover for registration.- (1) The limits for registration shall be,-

a) 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.

b) 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 or purchases during such year, is not less than Rs. 5,00,000.

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)

Cancellation of Certificate of Registration.–(1) Where,-

(a) any business, including that of a dealer who is deemed to be registered under sub-rule (3) of rule 9 of these rules, in respect of which a certificate of registration has been issued under these rules, has been discontinued, or has been transferred or otherwise disposed of, or

(b) neither the turnover of sales nor the turnover of purchases of a registered dealer, including a dealer who is deemed to be registered under sub-rule (3) of rule 9, has, during any year exceeded the relevant limit prescribed by these rules, then, the dealer shall apply in the prescribed manner, for cancellation of his certificate of registration and the Commissioner shall, after holding such inquiry as he deems fit, cancel the certificate of registration with effect from such date as he may fix in accordance with these rules :

(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.

 Some of the observations and questions on the above amendments are as under:

  1. In the financial year 2015-16, until the time , the turnover of sales or turnover of purchases of any dealer, exceeds Rs. 50 Cr no LBT shall be payable. From the point thereafter and for the balance financial year 2015-16 LBT shall be payable on the turnover exceeding Rs. 50 Cr.
  2. For the period 01-04-2015 to 31-07-2015, a dealer would have LBT charged turnover.
  3. For the period starting from 1st August 2015 a dealer would have an LBT free turnover till the time it reaches the turnover of Rs. 50 cr.
  4. Say the turnover of Rs. 50 cr is reached on 31-12-2015, then for the period starting with 01-04-2016 to 31-03-2016 the dealer would again have LBT charged turnover.
  5. The problem would arise in the financial year 2015-16 when the turnover of the financial year 2014-15 does not exceed Rs. 50 cr. In such a case, as per the amended rule 17(1)(b), the certificate of registration of such dealer shall be deemed to have been cancelled with effect from 1st August 2015. This would particularly be a difficult situation for a dealer who expects his turnover to reach Rs. 50 cr anytime after 01-08-2015. Since his Certificate shall already stand cancelled by the Deeming Provision in rule 17(1)(b) , he will again have to apply for fresh certificate of registration leading to avoidable administrative cost to the government and to the dealer both.
  6. It would have been wiser if the Cancellation of registration certificate was made OPTIONAL so that all those dealers who wish to remain under LBT regime because of their expectations of their turnover reaching Rs. 50 cr anytime during the financial year 2015-16 would be saved the avoidable hassles of unwilling Deemed cancellation of certificate of registration and thereafter mandatorily obtaining the certificate of registration once again.

2) The limit of turnover for registration:

Up till now the upper limit for registration was set at Rs. 5 Lacs which was very low and almost all of the dealers were covered within the regime of LBT Law and each of them was paying LBT regularly every year. However, with the upper limit now raised to Rs. 50 cr certain confusions are bound to arise.

It has now been 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. A few observations on the above amendments are as under:

a) Since GST is likely to subsume the LBT w.e.f. 1st April 2016,  this phrase -during any year- would mean only the F.Y. 2015-16.

b) As per the statement of the Finance minister, Government of Maharashtra in lieu of LBT, the government will impose surcharge on the Value Added Tax (VAT) till the Goods and Services Tax comes into effect.

c) As per the available information Goods and Services Tax is likely to be implemented w.e.f. 1st April 2016. (However, given the ruckus in the present monsoon session of parliament, the chances of Rajya Sabha passing the 122nd Constitutional amendment Bill 2014 are very bleak and consequently the implementation of GST w.e.f. 1st April 2016 may also have to be postponed.)

d) A dealer will get exemption upto turnover of Rs. 50 for F.Y. 2015-16 and pay the LBT on the turnover, if any, exceeding Rs. 50 cr. for the balance part of the same year.

e) How much time will it take to modify the present online system available at gov.in so as to segregate the dealers based on their turnover so as to levy surcharge on the VAT, in lieu of LBT , on all those dealers whose turnover do not exceed Rs. 50 Cr, leaving aside the dealers who have to pay LBT based on their turnover. ?

f) If the turnover exceeds Rs. 50 cr during the financial year 2015-16 AND GST Law implementation is deferred for some part of the F.Y. 2016-17 whether the dealer shall again get an exemption upto a turnover of Rs. 50 cr beginning 1st April 2016 till the date GST is implemented and pay the LBT on the turnover exceeding Rs. 50 cr for the balance part of that year i.e. period before GST. ?

g) As is generally the case, for fixing liability for any tax for a particular financial year, the criterion of the turnover of previous year is considered. Examples are: Audit u/s 44AB of Income Tax Act,(Turnover of Rs. 1 Cr.), Small service provider exemption for levy of service tax (Turnover of Rs. 10 Lakhs) , SSI exemption under Central Excise Act (Turnover of Rs. 400 Lakhs).

h) But a plain reading of the amendment rules does not convey the same message leading one to conclude that the turnover limit of Rs. 50 cr for exemption is available for the F.Y. 2015-16 even if the turnover of the F.Y. 2014-15 was more than Rs. 50 cr. The same would be the case for the F.Y. 2016-17 if the implementation of GST law is postponed for some part of the year.

i) The above observations/questions may not be of any relevance given that 99.85 per cent of traders in Maharashtra will be out of LBT

Copy of notification no. LBT- 2015/CR-47/UD-32. Dated -01-08-2015 amending the rules of LBT is as follows.  LBT NotificationReaders are requested to give feedback if any error of fact or that of interpretation is noticed so that the correct factual position maybe depicted.

Disclaimer

The above write up is the absolute personal opinion of the writer and does not amount to an expert legal opinion. It may or may not depict the legal position sought to be conveyed by the statute. Readers are cautioned to evaluate  the actual legal position before acting on this write up. Further, this write up is meant only for an academic interest and not for any other purpose .

Compiled by: CA LALIT MUNOYAT, B.Com.(Hons.),CS,FCA, DISA, @ munoyat@gmail.com # 98201 93508 

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27 responses to “Partial abolition of Local Body Tax (LBT) in Maharashtra w.e.f 01-08-2015”

  1. Preetesh Maloo says:

    Sir,
    One company incorporated on 22nd june 2015 and having turnover of 50 Lakhs from June 2015 to July 2015 in NMMC. Whether we can take 50 cr exemption on that or we will have to pay LBT on that? So let us know whether 50 cr exemption is effective from 1st april or 1st august 2015?

  2. Pratik Jain says:

    Dear Sir, my company(a) has turnover of 50cr.++… and it comes under Pimpri chinchwad munciple corporation(PCMC). we are procuring materials from vendors(b) which are also under PCMC area and having Turn over below 50 Cr. whether company (a) is liable to pay LBT for Procurement movement under PCMC Zone. please reply urgently…

  3. Pratik Jain says:

    Dear Sir,
    my company(a) has turnover of 50cr.++… and it comes under Pimpri chinchwad munciple corporation(PCMC). we are procuring materials from vendors(b) which are also under PCMC area and having Turn over below 50 Cr. whether company (a) is liable to pay LBT for Procurement movement under PCMC Zone. please reply urgently…

  4. Guru says:

    Sir,

    I have booked Maruti Wagon-R car from Automotive dealer in MIDC area of KDMC.
    The dealer has provided me the quotation consist of LBT. Just want to know whether it is justified ?? Whether the same dealer must have crossed turnover of 50 crores in 2014-15 ?? Is there any way to confirm or check the reality ?

    Please guide.

  5. Guru says:

    Sir,

    I have booked Maruti Wagon-R car from Automotive dealer in MIDC area of KDMC.
    The dealer has provided me the quotation consist of LBT. Just want to know whether it is justified ?? Whether the same dealer must have crossed turnover of 50 crores in 2014-15 ?? Is there any way to confirm or check the reality ?

    Please guide.

  6. Kailash rathod says:

    Sir I stay in kdmc area do I have to pay let for buying car for 7.5 lakes please reply

  7. Ruchi Gori says:

    1) Sir Last year the total turnover of the company was Rs 80 crs and we have LBT number.
    The companys total sale turnover till August 15 is 27 cr and purchase turnover (considered for LBT) is Rs. 29 lakhs till July 15 and we have paid LBT till July 15 month. In august out total purchase turnover for LBT is 32 lakh. Do we have to pay LBT for Aug 15 or not since the limit is above 50Cr in FY 15-16.

    Please advice

    Please ignore earlier post

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