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LBT: A Citizen’s Dilemma

5

June 1, 2013 by thejalebichronicles

Malice in Wonderland: Scorn for mainstream information that will shatter the image of Wonderland that we all have of the world.

courtesy: India Today

Just when you thought Dhoble saheb’s absence was a reason to party, the Government of Maharashtra pressed a glowing red buzzer and said, “Um, wrong answer!” With manmade drought haunting large expanses of rural Maharashtra and not much space left for sugar factories to germinate, the government seems to be looking at the state’s western shore to boost its revenue. LBT seems to be the name of their magic pill.

Local Body Tax, LBT (better known as: Leave Bombay Today,) will give local municipal bodies the powers to impose a tariff on traders and businessmen for the import of goods into their respective areas of jurisdiction. Unlike Octroi, which is collected at octroi nakas, LBT will be paid through cash, cheque, demand draft or even online.

Traders are required to make an inventory of goods they have imported during the month, feed this information into a software provided by the municipal corporation and compute their own liability. All of this seems like a good idea, right? The computerization will reduce the chances of corruption at toll nakas, added transport costs will be cut, etc. So, what’s so bad about LBT after all?

Traders protesting LBT. Photo credit: economictimes.indiatimes.com

Well, not much, except that LBT includes a lot of paper work. This may require assistance from a professional for a fee and not all traders can afford that. Traders are also angry about the double taxation they will face if LBT becomes a reality since VAT is already imposed nation-wide.

Even if LBT is implemented, traders doubt the practicality of it. According to Hozefa Ghadiali, who owns a computer hardware business in Mumbai, “Gujarat is collecting LBT but along with VAT, just an extra 1% or so, but there is no need to have to windows to pay both taxes. LBT will be collected by BMC, which, in my opinion, could be the most corrupt organization of India. Since the BMC will be collecting LBT, its officers have the ultimate powers to conduct raids in the name of compliance and keep doing vasooli from traders.”

Traders are also skeptical about reporting to one more department and see this as a chance for corruption to flourish. Angry traders had shut shop for almost a week and are now threatening to do the same. However, the average citizen is disappointed at being held ransom by the shortage of availability of essential goods if this on-again, off-again strike goes on.

Sharmishtha Thackrey, a consumer and film making student from Mumbai, stresses that LBT can turn out to be a good thing for the consumers. “LBT is replacing Octroi, which all the shop keepers evade,” she says, “but do not pass on the benefit to us. They pay less and charge us the actual amount. This is too one-sided. LBT will bring prices in control. It’s not like VAT prices will not go up.”

Although the Chief Minister of Maharashtra says he is open to dialogue with the traders, the government of Maharashtra refuses to stand down on the issue of LBT. As expected, the state’s opposition is rooting firmly for the traders. Ramesh Solanki, Mumbai divisional secretary of the Bhartiya Vidhyarthi Sena, cites LBT as an unreasonable law. “LBT is unfair,” says Mr. Solanki. “I support the traders. The economical situation is very tough and the new tax will kill businessmen and traders.” Interestingly, Suryanarayan Ganesh, an INC (Indian National Congress) affiliated consumer strongly backs LBT. “Fully support it, LBT is ideal way to prepare for GST. Octroi is prone to much more corruption, that’s why traders prefer it.”

Neither the government nor the traders are ready to compromise their positions. Meanwhile, citizens can be found scrounging at the bottom of our refrigerators for that last carrot. Whether the economic situation of the state will get better or not, one really cannot say. It seems, however, that no matter what we do, the Government of Maharashtra won’t stop hitting that glowing red buzzer. The question remains, is LBT really the wrong answer?

– Paloma Sharma

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5 thoughts on “LBT: A Citizen’s Dilemma

  1. Kumar Amit says:

    Keep up the good…Very nice 🙂

  2. Kumar Amit says:

    Ignore my last comment….Keep up the good work!! Very Nice 🙂

  3. Rishab says:

    Nice article. More analysis need to be done on LBT though. A few points I would like to share:

    Firstly, question that we must be asking the state govt. is if the whole country can function without LBT then why cant Maharashtra?

    Secondly, when VAT was increased by 1% in absolute terms, it was to offset the octroi which was to be eliminated from the chain.

    How can the state govt. try to abolish octroi by replacing it with LBT? Its not abolition in the absolute sense of the word. Let us stop talking about octroi evasion and corrupt officials for a moment. Point in case is octroi was promised to be abolished when VAT was increased. Period.

    This is a cascading tax where no clear input credit mechanism has been defined.

    It is very rare that a raw material vendor, manufacturer, stockists, retailer and consumer will lie in the same corporation. So when a mfg. in Vasai will pay LBT on his raw material called from outside his corporation. Then his stockist in Mumbai will pay LBT when he buys material from the mfr. Now when a retailer in Pune buys something from the stockist in Mumbai, LBT will be levied again. The consumer might just be in the Pimpri Chinchwad belt who will have to pay further LBT for this purchase. Now its not rocket science to know whats happening,

    A point to be noted is, stockists and importers have huge inventories of materials which might sell even after 6 months. No credit will be provided for materials sold outside corporation after 6 months. Ridiculous. Also there is no mechanism to auto offset your payable LBT incase you are making out of corporation sale. Fill forms, give proof, etc. Finally everyone will add to their input cost and will have to pass on burden to buyer or if they dont then further cut their already wafer thin margins. Note Industries like metal and iron-steel work at 2-3% profit.

    All industries dont survive on the sole consumption within the corporation or state. With this tax, Maharashtra trade will lose out to other states where all taxes will be subsumed in GST. So a consumer in Karnataka will prefer to buy industrial products directly from Gujarat. Ultimately, trade will decline and people will be forced to migrate to other states.

    I can go on writing forever on this topic. This Govt. is only preparing to conveniently implement LBT before GST rolls out across India. They need to continue their corruption and show traders in bad light. These ministers are the real theives.

    I’ll end this on a very practical note ; “Yeh sarkar Mantralaya mein kum, Sachivalaya mein zyada chalti hai”.

  4. Nivasan says:

    Octroi was prevalent from Roman times, and more ever when Maha Govt introduced VAT in 2005, it promised its citizens that Octroi will be abolished soon and there wont be any further tax burden on them.

    I never understand, why the Govt takes so much pain, in planning such a loosely worded tax structure, which actually depends on the tax collecting officer, to interpret the law, in the way he wishes to do.

    If the Govt is so concerned to fill up its coffers, why doesn’t it makes fundamental changes to BMC, which in-fact is a corrupt organisation. If corruption in controlled and tax collection is done efficiently in the present tax regime, then there is no need to levy any new tax on the citizens.

  5. I agree with nivasan in some points many times new system come up but one thing still put the problem and dis balanced the system or interrupt it to setup on the market that is corruption

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