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

  8. Ruchi Gori says:

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

    Please advice

  9. Rameshchandra.Zanwar says:

    Respected sir Last year we got turnover of Rs 100 crs and we have LBT no. pl advice our quarry as follow:- (1) We got LBT paid turnover of Rs 27 crs.up to Jully end. Now from 1/8/2015 how much turn over can we get Free oh LBT. (2) What will be definition for LBT turnover calculation of E One sales against C form. Pl advice

  10. CA Lalit Munoyat says:

    Misbah Tanha:

    The Registration of Registered Dealers having turnover less than Rs. 50 cr. in the preceding year shall automatically stand cancelled w.e.f. 01-08-15. No need to pay LBT till TO of current year exceeds Rs. 50 Cr.

    LBT is applicable on goods and not on services.

  11. Misbah Tanha says:

    We are manufacturer of UPS ( Uninterrupted Power supply ) and supply our UPS for Bank & ATM machine for power back up.

    Earlier most of the cases we used to provide our LBT no for supplying materials in our LBT registration and were taking reimbursement from customer, presently we are coming in less than 50 crore categories so our registration is cancelled.

    Kindly inform Bank/Financial institution/insurance companies are coming under LBT or not.

  12. xxx says:

    hi

    can return of financial year 2015-16 up to 31.07.15 filed are mandatary

  13. Mahesh Kumar says:

    Since 27 villages are brought in the area of KDMC w.e.f 1.6.2015 LBT was applicable to all dealers

    From 01/06/2015 LBT was applicable on dealers Whose T/O was more than 10 lacs ,
    but the said limit of T/O is increased to 50 Cr ,

    In view of this our Liability under LBT comes from 01/06/2015 being more than 10 lacs , However ,when the T/O limit Is increased to 50 Cr , weather we will be entitled to deduction of T/O upto 50 Cr as our T/O was less then Rs 50 Cr as on 01/08/2015.

    Weather the LBt will be levied on value addition when we have taken job of processing of our own material which is brought in the the area of KDMC Or LBT will be levied on the total value including Material of goods brought in

    Weather T/O of previous year will be consider for purpose of registration /Liability

  14. Avi says:

    Hi,

    Earlier (4 years back) when I bought a car I paid LBT to Mira Bhayander Corp @3% of exshowroom price.

    Now what happens, does this abolishment mean paying no LBT if I purchase a car?

    Thanks.

  15. Subhasis Banerjee says:

    To : Lalit Munoyat says

    It is not clear in your illustration how the said transaction would subject to VAT twice. Additional surcharge on VAT will be applicable only if the same is not subject to LBT. In your illustration none of the Municipality levies LBT that is why entire turnover will be subject to additional surcharge.
    Where is the question of payment of VAT twice ?

    Each legislation has its own jurisdiction but they could refer other legislation as well for better administration of law. In the past LBT legislation couple of times refer MVAT law as well such as dealer who is already registered under MVAT will be considered as deemed registered for the purpose of LBT. Even proposed additional surcharge in lieu of LBT is also one cross reference of two legislations. Unfortunately there is no explicit cross reference between MVAT and LBT as far as determination of threshold limit of turnover. The rational conclusion of threshold could be aggregate turnover in the sate and it will resolve the open issues and will be easy to administrate the law. If we analyse the illustration under discussion with the presumption that threshold limit is state level turnover,it will trigger LBT exposure in all the municipalities but there will be no surcharge exposure at State level.

  16. Yash Shah says:

    Thank you very much Mr.Banerjee & Mr.Lalit for the clarification….

  17. CA Lalit Munoyat says:

    To :S Banerjee Says

    Different laws have different jurisdictional boundaries. Like Excise has an all India jurisdiction, VAT has State level jurisdiction and Octroi, LBT have jurisdiction at each Municipal Corporation level.

    If the law is to be understood as what you have stated , it would amount to levy of VAT twice on the same transaction at the same level of supply. If a dealer has business in each of the 26 Municipal Corporations in Maharashtra (Leave 1 Mumbai where Octroi is applicable) and in each such corporation if he has a turnover of Say Rs. 40 cr then his total turnover in Maharashtra would be 1040cr
    In this case VAT will be payable on full 1040cr, LBT will not be chargeable in any municipal corporation but additional surcharge will be paid on this whole amount( alongwith VAT). The amount of this surcharge will go to the respective municipal corporations (In. lieu of LBT. The principles of distribution of surcharge as per the recommendation of the State Finance Commission.

    Regrading computational aspects, I already have my reservations which I have produced in the article itself.

  18. S Banerjee says:

    Even for argument sake if we accept threshold limit for LBT is Rs.50cr turnover within a particular Municipal Corporation, it will create an unintended hardship on dealer as illustrated below on account of proposed surcharge on VAT in lieu of LBT.

    Dealer A has turnover 55 cr, 40 cr and 30 cr in municipality X, Y and Z respectively. Therefore A is required to pay LBT only in municipality X. In MVAT return dealer will be required to bifurcate its turnover between LBT paid and LBT not paid to determine which turnover will be subject to additional surcharge and which will not be. This will add one more complexity apart from maintaining accounts municipality wise, dealer will be required to anticipate accurately on which sale he will collect additional surcharge.
    This is not the intention of the legislator.They want to reduce the hardship of dealer That is why they have brought threshold limit at the state level but have failed to communicate in a clear way.

  19. CA Lalit Munoyat says:

    1. The power to levy LBT is derived from The Maharashtra Municipal Corporations Act,1949 (MMC Act) while the same is administered by the Maharashtra Municipal Corporations (Local Body Tax),2010 (as amended upto 01-08-15). These rules don’t define many terms but it is provided that words and expressions not defined should have same meanings respectively as may be assigned to them in the MMC Act 1949. As per the said Act the following definitions are important:-

    2. Definitions:

    a. Section 2 (16A) “dealer” means any person who whether for commission, remuneration or otherwise imports, buys or sells any goods in the City for the purpose of his business or in connection with or incidental to his business, and includes,………………………………….

    b. Section 2 (31A) “Local Body Tax” means a tax on the entry of goods into the limits of the City, for consumption, use or sale therein, levied in accordance with the provisions of Chapter XIB, but does not include cess as defined in clause (6A) and octroi as defined in clause (42)

    c. Section 2 (70A) “turnover of purchases” means the aggregate of the amount of purchase price paid and payable by a dealer or a person in respect of any purchase of goods made by him during a given period, after deducting the amount of purchase price, if any, refunded to the dealer or the person by the seller in respect of any goods purchased from the seller and returned to him within a period of six months;

    d. Section 2 (70B) “turnover of sales” means the aggregate of the amount of sale price received and receivable by a dealer or a person in respect of any sale of goods made during a given period after deducting the amount of sale price, if any refunded by him to a purchaser, in respect of any goods purchased and returned by the purchaser to him within a period of six months and where the registration certificate is cancelled, the amount, in respect of sales made before the date on which the cancellation became effective, received or receivable after such date;]

    3. Person liable to Pay LBT: Any dealer who brings goods into the limits of the municipal corporation for use, consumption or sale therein is liable to pay LBT.

    4. These rules don’t provide the value with reference to which LBT is required to be paid but generally it is understood that it is required to be paid with reference to the value as per purchase invoice.

    The turnover limit for registration is with reference to the value of turnover within the limits of the municipal corporations. There are about 27 municipal corporations in Maharashtra out of which Mumbai Corporation is not covered by LBT (because it charges octroi). The limit of turnover is separate and independent for each corporation and where it exceeds the minimum limit in more than 1 corporations, separate registrations are required to be taken for each corporation.

  20. CA Lalit Munoyat says:

    1. The power to levy LBT is derived from The Maharashtra Municipal Corporations Act,1949 (MMC Act) while the same is administered by the Maharashtra Municipal Corporations (Local Body Tax),2010 (as amended upto 01-08-15). These rules don’t define many terms but it is provided that words and expressions not defined should have same meanings respectively as may be assigned to them in the MMC Act 1949. As per the said Act the following definitions are important:-

    2. Definitions:

    a. Section 2 (16A) “dealer” means any person who whether for commission, remuneration or otherwise imports, buys or sells any goods in the City for the purpose of his business or in connection with or incidental to his business, and includes,………………………………….

    b. Section 2 (31A) “Local Body Tax” means a tax on the entry of goods into the limits of the City, for consumption, use or sale therein, levied in accordance with the provisions of Chapter XIB, but does not include cess as defined in clause (6A) and octroi as defined in clause (42)

    c. Section 2 (70A) “turnover of purchases” means the aggregate of the amount of purchase price paid and payable by a dealer or a person in respect of any purchase of goods made by him during a given period, after deducting the amount of purchase price, if any, refunded to the dealer or the person by the seller in respect of any goods purchased from the seller and returned to him within a period of six months;

    d. Section 2 (70B) “turnover of sales” means the aggregate of the amount of sale price received and receivable by a dealer or a person in respect of any sale of goods made during a given period after deducting the amount of sale price, if any refunded by him to a purchaser, in respect of any goods purchased and returned by the purchaser to him within a period of six months and where the registration certificate is cancelled, the amount, in respect of sales made before the date on which the cancellation became effective, received or receivable after such date;]

    3. Person liable to Pay LBT: Any dealer who brings goods into the limits of the municipal corporation for use, consumption or sale therein is liable to pay LBT.

    4. These rules don’t provide the value with reference to which LBT is required to be paid but generally it is understood that it is required to be paid with reference to the value as per purchase invoice.

    5. The turnover limit for registration is with reference to the value of turnover within the limits of the municipal corporations. There are about 27 municipal corporations in Maharashtra out of which Mumbai Corporation is not covered by LBT (because it charges octroi). The limit of turnover is separate and independent for each corporation and where it exceeds the minimum limit in more than 1 corporations, separate registrations are required to be taken for each corporation.

  21. S Banerjee says:

    Turnover should be gross turnover in Maharashtra as because the proposed surcharge on VAT in lieu of LBT will be applicable on dealer whose turnover is less than Rs.50cr in a particular financial year.
    Therefore in Maharashtra there will two categories of dealer one category will pay surcharge on VAT in lieu of LBT and others will pay no surcharge since they are paying LBT to Municipal corporation. Govt will distribute surcharge so collected from the dealers to Municipal Corporation to compensate their loss.

    LBT is a destination based consumption tax so it is a tax on purchase and not on sale.

    If a dealer crosses its turnover Rs.50 cr on March 31, 2016 in Maharashtra it has to pay LBT to the respective Municipal Corporation on its purchase from August 2015 and
    could claim refund of surcharge so paid in lieu of LBT from the VAT authority.

  22. HARI BABU says:

    Clarifications are required from the Government on the amendment. Otherwise, there will be lot of interpretation issues which will lead to litigation.

    First of all, the turnover limit should be clarified. Whether the limit of Rs.50 Cr., is for each municipal corporation or entire State taking into consideration all the municipal corporations where the LBT is applicable. The turnover limit should be considered as Rs.50 Cr., per each municipal corproation.

    Secondly, only turnover of purchases is to be considered. LBT is on the goods brought into the municipal corporation limits. Thereby, only purchaser is liable for tax. Therefore, purchase tax is only to be considered. Sales turnover is not relevant.

  23. Yash Shah says:

    What is the definition of turnover??
    Will it include gross turnover or net turnover??
    What is the exact definition of dealer?
    If any dealer has various branches in several municipal corporations where LBT is leviable, then will all these branches be considered as separate dealers?
    And if they are considered as separate dealers then it’s turnover criteria of Rs.50 crore should also be considered separately for the purpose of levying LBT?

  24. CA Ramachandra sharma says:

    Hi

    I think rules makers of Maharastra does not know how to draft notification or amend the law, from the begining of implimentation of LBT till its abolition, its creating confusions only.
    1. Turover for each municiple coporation or whole of Maharastra not difined.
    2. Jurisdiction of each municiple corporation unknown.
    3. Who is liable for LBT, purchaser of goods or seller of goods.
    4. In case it is applicable to seller,who is selling the goods from outside Maharastra to variuos purchaser with in any of the LBT juridiction,(assum more than 50 cr), how to do they catch there these vendors.
    5. online payment for corporate banking not available.

  25. Prashant patil says:

    Dear sir,

    can you please define Turnover definition? .

    if i am operating My business into whole maharashtra cities & Villages? so Shall I consider turnover citi-wise ( Municipal corporation wise or state wise turnover for registraiton purpose?

    Please suggest

  26. Anant Keshav says:

    What is meaning of turnover of sales. Is it referred for sales of goods. If a pure service provider having no physical sales of goods having turnover over 50 crore is liable to LBT?

  27. KALPESH says:

    Please clarify on the word ‘turnover’. Whether turnover of whole Maharashtra or turnover of the municipal council area of LBT? If a company have its distribution location in all major cities where LBT applies then turnover of the company consider city wise or whole?

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