With the introduction of Local Body Tax (LBT), by Nagpur Municipal Corporations in Maharashtra a wave of anxiety has struck most of the businesses. This brief summary is an attempt to provide answers to some of the most relevant questions about the LBT.

What is Local Body Tax?
Local Body Tax is a tax on entry of goods within municipal limits. LBT has been introduced in place of Octroi. LBT was already operational in the city of Nanded, Aurangabad, Kolhapur, Jalgaon etc. Starting 1 April 2013 it has been introduced in Pune, Pimpri- Chinchwad, Thane, New Mumbai, Nagpur, etc. LBT is governed by provisions of Maharashtra Municipal Corporation Act, 1949 (the Act) and Bombay Provincial Municipal Corporation (Local Body Tax) Rules, 2010 (LBT Rules).

Who is liable to pay LBT?
Any dealer who brings goods into city limits for use, consumption or sale therein is liable to pay LBT. The term ‘dealer’ has been defined in the Act.

Will a person be liable to pay LBT, if goods are brought into city limits for his exclusive consumption or use?
No, a person will not be liable to pay LBT, if he/ she brings goods into city limits for his/ her exclusive consumption or use. As such transactions are expressly excluded from the definition of "dealer".

What is the taxable event under LBT?
Entry of goods in the city limits for use, consumption or sale therein is the taxable event under LBT. The term ‘City’ has been defined in the Act and would ordinarily conform to the municipal corporation limits.

What are the registration requirements under LBT?
All dealers whose turnover of sales / purchases exceeds the threshold limit need to obtain registration
Threshold limit for this purpose are as follows:
DealerImport Criteria Schedule A goods Turnover Total Turnover
Importer* more than or equal to Rs.5,000/- and Sales/ purchases of more than or equal to Rs.5,000/- and Rs. 3,00,000/- (In case of corporations having population more than or equal to 20 Lakhs) Rs. 1,00,000/- (In other corporations)
Others (Local Purchase Dealers) N.A. Purchases of Rs. 5,000/- Sales/ purchases of more than or equal to Rs. 4,00,000/- in a year (In case of Corporation having population more than or equal to 20Lakhs) Sales/ purchases of Rs. 1,50,000/- (In other corporations)
It may be noted that the aforesaid limits have been sought to be revised. Further, every person liable to obtain registration is required to make an application for registration in Form A. Every dealer who is registered in terms of Maharashtra Value Added Tax Act, 2002 on appointed day is deemed to be registered for the purposes of LBT and can get LBT number by entering VAT TIN on .
* An importer is a person who brings or causes to bring any goods in the limits of city from a place outside city for use, consumption or sale therein.

Would a person selling goods from outside a local area require to register?
No, if a dealer exclusively sells goods from outside city limits, then he/ she is not required to register. However the recipient of the goods in the city would be liable to obtain registration; if he satisfies the criteria for liability and registration. (If a person has shop/ godown in city as well as outside city, it is suggested to disclose the same as additional place of business in the registration form)
Further, if the goods imported are not brought in Corporation area and directly sent to godown/ office/ branch and sold directly from outside Corporation limit then LBT is not payable. Proper recording in books of accounts, inward – outward register, delivery challans and dispatch proofs are required.

On what value LBT is payable?
The LBT regulation does not explicitly provide for value on which LBT is required to be paid. Rule 24 provides for determination of tariff value by the Commissioner in case of certain goods. Whereas, Rule 25 states that the Commissioner may determine the fair market price of goods if there are reasons to believe that sale price/ purchase price is less than the fair market value, in the specified different scenarios. (On perusal of aforesaid provision it appears that LBT is required to be paid on the invoice price charged in a particular transaction. However, there are no explicit provisions in this regard and this requires clarification from the authorities)

What are the due dates for paying LBT? What is the mode of payment?
LBT is payable on a monthly basis and should be paid within 20 days of the following month. Payment should be made by filling LBT payment challan.
In any of the following Banks:
  • Axis Bank
  • Bank Of Maharashtra
  • ICICI Bank
  • IDBI Bank
If the seller – importer does not pay LBT, will the purchaser be liable?
LBT is tax on entry of goods within city limits. Therefore, primary responsibility of paying LBT vests with the dealer who brings goods into municipal limits. Therefore, it would be the responsibility of seller/ importer to discharge LBT in respect of goods he brought in the city limits for sale. If however, a person other than a registered dealer imports goods into the city limits and thereafter sells such goods to a registered dealer, then such registered dealer shall be liable to discharge LBT unless it is proved that these goods have already suffered LBT in that city.

Does a seller need to mention LBT registration number on the Invoice?
In terms of Rule 21 and 22 of the LBT Rules, every bill / invoice / cash memo issued by the selling dealer should contain the following:
  • full name and style of the business;
  • Address of the business place;
  • LBT registration certificate number;
  • Particulars of the goods sold and the sale price thereof; and
  • A certificate containing the following declaration:
"I/we hereby certify that my/our registration certificate under these rules is in force on the date on which the sale of the goods specified in this bill/invoice/cash memorandum, is made by me/us and that the transaction of sale covered by this bill/invoice/cash memorandum, has been effected by me/us in the course of my/our business."
Further, if the price of goods is Rs. 500/- or more, then the dealer needs to mention in such bill / invoice / cash memorandum, the following details of the buyer:
  • Name and style of the business;
  • Buyer’s address; and
  • Number of LBT registration certificate.
What are the due dates for filing return?
Annual return is required to be filed in Form E-II within 90 days from the end of the respective financial year.

What records are to be maintained?
In terms of LBT regulation, every dealer is required to keep true account of value of goods imported, purchased, consumed or sold by him as prescribed. The dealer is also required to keep in his record a counterfoil/ duplicate of bill/ invoice issued in respect of imported goods. Further, as per Rule 19 of LBT Rules, every dealer is required to maintain a register of purchases and receipt of goods on transfer basis in "Form D" for each place of business. The records are required to be preserved for minimum period of five years.

Are any exemptions/ deductions available for determining the LBT amount?
LBT regulations provide for full/ partial exemptions in following cases subject to prescribed conditions u/r 28:
  • Goods imported into local area by / on behalf / on account of State or Central Government, belonging to such Government and meant for public purpose and not used / intended to be used to earn profit ;
  • Goods exported out of India;
  • Goods rejected and returned by the purchaser, within six months from the date of its export out of the local area
  • Goods sent and received for job work
Under what circumstances can a dealer / person opt for composition scheme?
Dealers having turnover less than rupees ten lakhs can opt to pay lump sum amount towards LBT based on the prescribed slab and following the specified procedures. A separate composition scheme has been specified for builders and contractors.

What are the refund provisions available under LBT?
LBT regulation provides for refund/ drawback at ninety per cent of LBT paid in case goods imported from outside city limits are moved out without “consumption, use or sale within city ” * . A dealer who is regularly importing and re-exporting goods, specified in Schedule A, may obtain prior permission from the Commissioner to pay only 10 per cent of the LBT to avoid claim of refund.

* A plain read of Rule 32 implies that, only the goods which imported into city with an intention of export out of city are eligible for refund/ drawback, but will the goods which are imported with an intention of "consumption, use or sale within city"; subsequently exported out of city without "consumption, use or sale within city" be eligible for refund/ drawback; Will packing, repacking, bundling, unbundling of goods be considered use/ consumption. No explicit provisions has been provided in the Act/ Rules regarding these. Requiring clarification from the authorities in these concerns.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
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