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Local Body Tax

What is Local Body Tax?

Local body tax is a tax levied by local civic bodies on the entry of goods into a local area’s (town, city or state) limits for consumption, use or sale therein by traders, businesses and manufacturers. It is an account-based cess collection for raw materials that are used or imported into the local area’s limits. In the state of Maharashtra, the local body tax system was introduced under the provisions of Maharashtra Municipal Corporation Act, 1949, and the Bombay Provincial Municipal Corporation Rules, 2010. The tax has replaced the "Octroi" and "Cess" system of taxing. The Local Body Tax has been scrapped by the implementation of Goods and Services Tax (GST) from 1st July 2017.

History of Local Body Tax

Local body tax overrides the octroi and cess taxation system. The octroi system found its beginnings in ancient Roman times - where tax was levied tax on goods as they entered the limits of the civic body. Goods carriers and trucks were required to pay tax when they got into the city limits at the octroi check posts. In 2013, the Indian state of Maharashtra and a state in Ethiopia were the only known places to levy octroi. The tax system has been existent in Maharashtra since the year 1965.

At a joint session in March 2013, Maharashtra’s 17th Chief Minister Prithviraj Chavan announced that octroi and cess shall be cancelled. Instead, local body tax would be imposed in the municipalities of Pune, Nagpur, Mumbai, Thane and Pimpri-Chinchwad during the same year. Traders, however, were not too keen over the new tax system and protested over it. After reconsideration, local body tax was partially scrapped in Maharashtra in August 2015. As per the amended rules, only dealers with turnover of sales or purchases greater than Rs. 50 crores, during any year, are liable to pay local body tax.

Applicability of LBT

Local body tax is levied on goods brought inside the limits of respective municipal corporation for sale, use or consumption. Some of the goods on which local body tax is applicable on are:

i) Hairpins, Imitation Jewellery, beads of glass and plastics

ii) Handloom woven gamcha

iii) Sunglasses, goggles and implant lenses

iv) Coffee beans and seeds, cocoa pod, green tea leaf and chicory

v) Gypsum of all forms and descriptions excluding gypsum boards

vi) Ink pads of any forms

vii) Kerosene oil sold through the Public Distribution System

viii) Ores and minerals

ix) Torches of all varieties and components, parts and accessories thereof

x) Rail coaches, engines and wagons and parts thereof

xi) Ship and other water vessels

xii) Sports goods excluding apparels and footwear

xiii) Poultry machinery and equipment

xiv) Vegetable oil including gingili oil, castor oil and bran oil

xv) Vehicles operated on battery or solar power

xvi) Aerated and carbonated non-alcoholic beverage whether or not containing sugar or other sweetening matter or flavour or any additives

xvii) Lime, limestone, products of lime, dolomite

xviii) Country liquor, as defined in Maharashtra Country Liquor Rules, 1973

xix) All Sorts of foams, all sorts of foam sheets, Foam Leather

xx) Potash, Ritha, Soda, Alum, (Saline substances), Washing Soda, phenyl and other substances and floor and utensils

xxi) Fireclay, coal ash, coal boiler ash, coal cinder ash, coal powder, clinker

xxii) a) Pulse flour including besan mixed with flour of other pulses

(b) Pulse flour including besan mixed with flour of cereals including maize

(c) Pulse flour including besan mixed with flour of other pulses and cereals

xxiii) Goods of incorporeal or intangible character, other than those covered under entry 39 in Schedule-A and notified vide Government notification, Finance Department No. VAT-1505/CR114/Taxation-1, dated 1st June 2005

xxiv) Water other than,

(a) aerated, mineral, distilled, medicinal, ionic, battery, demineralised water

(b) water sold in sealed container

(c) water for injection

xxv) Industrial inputs and packing materials notified vide Government Notification,

Finance Department No.VAT-1505/CR-234/Taxation-1 dated 1st September 2005 read with Government Notifications, Finance Department No. VAT1505/CR-348/Taxation-1, dated 25th August 2006, No.VAT-1505/CR-60/ Taxation-1, dated 19th September 2007 excluding entry at Sr. No. 54 (A and B)

(a) khava, loni, ghee

(b) cream, cream cheese

Some of the goods exempted from local body tax are:

i) Animal driven carts including bullock carts and components, parts and accessories thereof (excluding bearings, tubes and tyres)

ii) Bread (excluding pizza bread) in loaf, rolls or in slices, toasted or otherwise

iii) Buttermilk, separated milk, lassi and curd (excluding buttermilk, separated milk, lassi and curd whether or not sweetened or flavoured when sold under a brand name)

iv) Idols of deities in clay or Plaster of Paris

v) Judicial and Non-judicial stamp paper when sold by Government Treasuries; postal items like envelops, postcards etc. when sold by Government

vi) Handmade Laundry Soap manufactured by Units certified by the Maharashtra State Khadi and

Village Industries Board constituted under the Bombay Khadi and Village Industries Act, 1960, but excluding detergent

vii) Milk, that is to say, animal milk in liquid form except when served for consumption and excluding

(a) condensed milk whether sweetened or not, and

(b) milk containing any ingredient and sold under a brand name

viii) Fresh vegetables, potatoes, sweet potatoes, yam (elephant’s foot), onions and fresh fruits, excluding wet dates, except in frozen state or in sealed container

ix) Fishnet, fishnet fabrics, fish seeds, prawn seeds and shrimp seeds

x) Fresh plants, Saplings and natural flowers excluding Mahua flowers

xi) Poha, lahya and chirmura

xii) Silkworm laying, cocoon and raw silk

xiii) Newspapers

xiv) Organic manure (excluding oil cakes and de-oiled cakes)

xv) Fresh vegetables, potatoes, sweet potatoes, yam (elephant’s foot), onions and fresh fruits, excluding wet dates, except in frozen state or in sealed container

xvi) Goods distributed through the Public Distribution System, (except kerosene)

(a) Gur

(b) Chillies, turmeric and tamarind whole, powdered or separated.

(c) Coriander seeds, fenugreek and parsley (suva) whole or powdered.

(d) Coconut in shell and separated kernel of coconut other than copra.

xvii) Slate and slate pencils but not including writing boards

xviii) (a) Incense sticks commonly known as agarbatti, dhoop, dhupkadi or dhupbatti.

(b) Camphor

(c) Loban and Ral

xix) Cereals (other than paddy, rice and wheat) in whole grain, split or broken form and their flour singly or in mixed form.

(a) Paddy, rice, wheat and pulses in whole grain, split or broken form.

(b) The flour of wheat and rice including atta, maida, rawa and suji whether singly or in mixed form.

(c) The flour of pulses including besan singly and not mixed with flour of other pulses or cereals.

xx) Broomsticks and brushes of a type used to clean floor including toilet floor

Source: pmc.gov.in/sites/default/files/LBT-RATE-LIST.pdf

Amnesty Scheme

Under the Amnesty Scheme (also called The Maharashtra Municipal Corporations Local Body Tax Amnesty Scheme 2015), penalty and interest on the pending dues of local body tax shall be waived for the amnesty period of 3rd June, 2015, to 31st July, 2015, subject to the fulfilment of certain conditions, like registration, payment of tax, filing of returns, etc. According to a government notification, "this scheme shall be applicable to the registered as well as non-registered (if trader or person registers himself during the prescribed time period of Amnesty Scheme) trader or person and for temporary registered person or trader for specific year." Should a trader only have paid part of the outstanding principal amount of tax, then interest and penalty shall be waived in respect to only the tax paid, and the balance tax that is unpaid would be recovered with interest and penalty.

According to news reports, a three-month local body tax amnesty scheme has been approved by the cabinet for twenty-seven villages included in the Kalyan-Dombivali Municipal Corporation limits. Under this scheme, if the original tax has been paid, then the interest and penalty shall be waived off, the reports added.

Frequently Asked Questions

Who is exempted from paying local body tax?

Traders whose annual turnover is below Rs. 50 crores are exempted from paying local body tax.

What is the benefit of the amnesty scheme?

The amnesty scheme provides full waiver from interest and penalty, subject to fulfilment of certain condition. In the event of part payment of tax, the waiver extended shall be limited, corresponding to how much tax has been paid.

Is local body tax payable on the sale of vacant land within a municipal corporation's area?

Local body tax is levied on movable goods, and not on immovable property. Therefore, this tax shall not apply on sale of vacant land within municipal corporation area.

Where can one make payments toward local body tax within the limits of Thane Municipal Corporation?

Payment of local body tax can be made at any of the below mentioned banks with branches falling under the TMC area limits:

  1. PNB - 1144002101022552
  2. IDBI - 0117102000019008
  3. BOB - 12480200000507
  4. HDFC - 50200003781860
  5. ICICI - 188505000120
  6. BOM - 60130744772
  7. SBT - 67235921405
  8. AXIS - 914020004711094

Are services included in the sale turnover limit?

While calculating the turnover, only sale or purchase of goods are to be considered. Turnover with relation to services shall not be factored in for the purpose of local body tax assessment.

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