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Mumbai and Pune To Replace Octroi with LBT

With 19 out of 26 municipal corporations in Maharashtra already following the Local Body Tax (LBT) structure, it is now turn of the big boys in Pune, Thane and Mumbai
While the 6 municipal corporations will replace Octroi with LBT from April 1, 2013, Mumbai will do so from October 1, 2013.

Of the 26 municipal corporations in Maharashtra, so far LBT has been adopted by 19 such as Kolhapur, Nashik, Aurangabad, Vasai-Virar. But bigger corporations such as Mumbai, Thane, Pimpri Chinchwad, which earn sizeable revenue from octroi, are yet to make the switch.

LBT is an account-based system where traders and businessmen pay the tax monthly by way of self-declaration. All the municipal corporations are yet to announce the rate of LBT that will be applicable in their cities.
The IT channel had mixed reactions on the topic. “From what I hear, BMC is planning to levy LBT of 4 percent in Mumbai. The rate of LBT on IT products in Mumbai will be more but not less than 4 percent as against Octroi rate of 5.5 percent. So there is not much reprieve in terms of lower taxation,” said Kshitij Kotak, CEO, Fortune Grecells and President, ASIRT.

Rushabh Shah, CEO, Graham Information Systems and President, TAIT, said, “Introduction of LBT would make movements of goods faster. In addition, it will address corruption that is rampant with the current system. It will also create a level playing field among the IT channel. All of us know that some operators bring goods without paying Octroi thus putting tax-paying companies at a disadvantage.”

Paresh Shah, Partner, PH Teknow and Treasurer, ISODA wants the government to provide clarity on the rate and structure as soon as possible. “We are happy to know that octroi will go from October but they have not specified the model for LBT. There is no clarity on whether the taxes will be applicable at multiple levels. For example, will the entire value chain including the distributor, sub-distributor, reseller and the consumers have to pay the LBT? If that is the case, it will increase cost and complexity at all levels.”

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