Introduction

In Municipal Corporation areas of some cities, a new form of Entry Tax known as LOCAL BODY TAX (LBT) has already been made applicable on the goods brought into the local area of Municipal Corporation for specific purpose.

LOCAL BODY TAX is an alternative tax for existing system of octroi. The Maharashtra Municipal Corporation Act, 1949 provides that the Municipal Corporation (Corporation for short) may levy and collect Local Body Tax on the entry of specified goods into the limits of the City for consumption, use or sale therein, at specified rates.

In exercise of powers conferred by sub-section (1) of Section 152T of the said Act, the Government of Maharashtra has framed Rules, namely “The Maharashtra Municipal Corporations (Local Body Tax) Rules, 2010” (hereinafter referred as LBT Rules) which governs all the provisions of Local Body Tax.

What is Local Body Tax?

LBT is defined under Section 2(31A) of The Maharashtra Municipal Corporation Act, 1949 by inserting the said Section by Mah. Act No. 27 of 2009 w.e.f. 31-8-2009.

“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).

Important Terminologies with specified meaning

‘Import’ is not defined under the Act or the Rules. Import means when the goods are brought within the limits of Corporation by way of purchase or otherwise.

‘Export’ is also not defined under the Act or the Rules. ‘Export’ means when the goods are moved outside the limits of Corporation by way of sales or otherwise.

Limits of Turnover for Registration [Rule 3(1)] (from 1-8-2015)

By insertion of proviso to Rule 3(1) it is provided that the dealer whose turnover of sales or turnover of purchases is not less than ₹ 50 Crore during any year, he shall only be liable for registration.

Note: Here, the turnover of ₹ 50 Crore within city is to be considered for each city separately.

Temporary Registration [Rule 3(2)]

If a dealer is carrying on a business in the city on a temporary basis, then he shall be liable for temporary registration under the Act & Rules, irrespective of turnover of Sales & Purchases mentioned in sub-rule (1) as above.

Cancellation of Certificate of Registration (Rule 17)

1. When business is discontinued or transferred or disposed of, the dealer shall apply for cancellation of Certificate of Registration in Form ‘C’.
2. If turnover of sales or purchases did not exceed the limits prescribed under LBT Rules in any year, the dealer may apply for cancellation of Certificate of Registration in Form ‘C’
3. The dealer shall surrender the copies of Certificate Registration to the Commissioner within 15 days from the date of receipt of cancellation order.

Exemption in Certain Cases (Rule 28)

1. No LBT shall be levied on the goods imported into the city by State or Central Government for public purpose and are not used or intended to be used for earning profit.
2. No LBT shall be levied on the goods imported on behalf of or on account of State or Central Government for public purpose and are not used or intended to be used for earning profit, if certificate from Government Officer is produced within six months.
3. Goods moved outside city reimported:

   If any goods moved outside of the City area for carrying out certain process as enumerated in Explanation to Rule 28 and are reimported without effecting any change in condition and appearance and ownership of the goods, then the value of the goods moved out shall be allowed as a deduction from total value of processed goods reimported and LBT shall be levied on value addition i.e., only on value of processing charges, transfer charges, etc.

   Provided that goods are reimported within six months from the date of export and dealer furnishes the information of such export in his return for the relevant periods.

4. Imports for processing:

If any dealer imports any goods into the city for carrying out any of the process as enumerated in the Explanation under Rule 28 and the goods so processed are exported within a period of six months from their importation to the same person without change in ownership and in the form of the goods, then no LBT shall be levied on such imports, on fulfilment of following conditions —

1. That the dealer shows value of such goods in the return for relevant periods.
2. That the dealer pays security deposit as a guarantee as may be determined by Commissioner. The dealer importing goods for processing on regular basis may make a “Standing Deposit” as may be fixed by Commissioner.

The Explanation given under Rule 28 enumerates following processes.

Explanation: For the purpose of sub-rules (3) and (4) processing shall include—

1. Grinding, dyeing, bleaching, painting, printing, finishing, stentering, embroidering, doubling, twisting, metallising and electroplating;
2. Building and mounting of bodies over chassis of vehicles of all kinds.
3. Any other processes as may be approved by the Commissioner, from time-to-time.

The decision of the Commissioner in this respect, shall be final.

5. Goods Rejection

   If any goods are exported outside the city are received back due to rejection into the city area within period of six months from the date of export, then no LBT shall be levied on such goods, provided such sale of goods are disclosed in the return of the relevant period.

6. The registered dealer who exports the goods outside territory of India, such goods shall be exempt from levy of LBT, in respect of value of such goods used for the purpose of such export.

Determination of Disputed Question (DDQ)

(Rule 31)

If any question arises, when the matter is not before any court or before Commissioner has commenced assessment or reassessment of a dealer in respect of LBT payable on goods imported or rate of LBT thereof, the Commissioner may on application made to him by a dealer, make an order determining such question.

The Commissioner may direct that such determination order may not affect the liability of dealer prior to the determination.

If any such question arises from any order already passed under the Act or Rules no such question shall be entertained for determination.

Refund of LBT in case of Export (Rule 32)

1) Where any goods which are imported in the city on which LBT has been paid, are exported outside the city by the same person by way of sale or otherwise, then ninety per cent of such amount of LBT so paid, shall be refunded to that person by order in Form M, on satisfaction of following conditions :

1. The details of import made for export are given the relevant return furnished.
2. LBT on such import is paid with relevant return.
3. Goods are exported within period of six months from date of importation.
4. Relevant Return claiming of refund after export is furnished.
5. The person when asked by Commissioner, shall prove that goods imported have been exported without making change in the good, (i.e., in the same form).

Proviso to the Rule 32 provides that if a dealer who is importing and exporting taxable goods, the Commissioner on his satisfaction may allow such dealer to pay 10% of LBT, after obtaining a declaration from such dealer that the goods are to be exported within the specified period. For this, prior permission of the Commissioner is necessary.

Assessment (Rule 33)

The assessment of LBT due from the dealer shall be made for each period separately.

Summary Assessment

If the Commissioner is satisfied that return furnished by a dealer are correct and complete, then he shall assess the amount of LBT due, on the basis of returns filled.

Regular Assessment

If dealer has failed to furnish the returns, if the returns are not correct & complete, if dealer has claimed refund or if dealer has applied for cancellation of Registration Certificate, then the Commissioner may assess the LBT payable by requiring presence of the dealer or the production of further evidence, in support of returns furnished. And the assessment will be completed on verification of records.

URD Period Assessment

If a dealer or person who is liable to pay LBT but has failed to apply for registration or if a dealer has directed by Commissioner in Form ‘G’ to furnish return, the Commissioner may assess LBT payable by such a dealer or person.

Best Judgment Assessment

If a registered dealer fails to comply with the terms of notice issued for assessment purpose, the Commissioner may assess to the best of his judgment, the amount of LBT due from him.

Reassessment (Rule 34)

After the dealer has been assessed u/r. 33, if the LBT payable in respect of goods imported into the city has escaped assessment and the Commissioner has documentary evidence on record or if the assessment is made at a lower rate or any deduction has been wrongly made or a claim has been wrongly allowed or refund has been wrongly granted, then the Commissioner may at any time within three years from the date of communication of such assessment order, after recording the reasons in writing therefor proceed to assess or reassess the amount of LBT due by issuing notice in Form K.

Rectification of Mistakes (Rule 35)

The Commissioner may at any time within two years from the date of any order passed by him, on his own motion, rectify the mistake apparent on the face of record, and shall also rectify any such mistake which has been brought to his notice by any person affected by such order.

Provided that if such rectification order has an effect of enhancement of Local Body Tax or reduction of refund then the Commissioner has to give notice in Form P to such person and grant him a reasonable opportunity of being heard.

Interest (Rule 48(3))

If a dealer liable to pay LBT does not pay the LBT on or before the due date, then he shall be liable to pay simple interest, in addition to amount of LBT, a sum equal to 2% per month of such LBT for first 12 months after due date to the date of payment.

If any LBT is found due as a result of order of assessment passed under this Act, then such dealer is liable to pay simple interest, a sum equal to 2% of such LBT for each month from the first date after assessment period till the date of such order of assessment.

Provided that such interest shall not exceed the amount of LBT due on which such interest is changed.

Appeals (Section 406(6) & Rules 36 & 37)

Section 406(6) of the Act provides for an Appeal against the demand notice for the levy of LBT. If the Demand Notice is raised by any LBT officer not being Deputy Commissioner then the appeal is to be filed to the Deputy Commissioner & if Demand Notice is raised by the Deputy Commissioner then the appeal is to be filed to the Commissioner.

The appeal shall not be entertained by the appellate authority unless the amount of disputed LBT dues has been deposited by the appellant with the Commissioner.

Such appeal is to filed within 15 days from the date of demand notice. It is to be noted that there is no provision to condone the delay if appeal is not filed within time prescribed.

The Rule 36 provides that the appeal is to be filed in Form ‘S’ containing the required information duly signed and verified by the appellant or by an agent. The memorandum of appeal shall be accompanied by the certified copy of the demand notice and order.

Rule 37 provides for the hearing of appeal. The Appellate Authority shall fix the date of hearing of appeal not earlier than 10 days from the date on which intimation is given to the appellant.

If the appellant fails to appear before the said authority the authority may dismiss the appeal or may decide it ex parte it may think fit.

However, if the appellant makes an application for setting aside such order, within 30 days from the date on which appeal was dismissed or decided exparte& satisfies the authority that intimation was not duly served on him or that he was prevented by sufficient cause from appearing before him.