All About - Local Body Tax (LBT)

DIFFERENCE BETWEEN LBT & OCTROI

OCTROI	LBT
The BMC collects on every item that is brought into city for sale or consumption.	LBT will be applicable to all traders who use imported commodities. A trader can claim exemption from LBT if the item is to be exported.
Octroi is imposed on traders at the city’s octroi check post, which are entry points into the city.	LBT will be levied through self-declaration, which means every trader will have to declare the worth of the goods that he has imported.

LBT'S IMPACT IN CIVIC COFFERS

Octroi is collected on a daily basis, but traders can pay LBT on a monthly basis, which means the cash flow is likely to be affected. Currently, octroi is the BMC' S largest revenue generator, with an approximately annual collection of Rs.7500 crore. The state has expressed its willingness to compensate for any short fall in LBT collections. 

 WILL IT AFFECT YOU?

The state is yet to frame rules and the act under which LBT will be applied, so it's not clear if the tax imposed will be more than what is imposed under octroi. The BMC has specified that the tax rates will remain the same. However, more traders will have to pay LBT as compared to the number of traders paying octroi as everyone who uses imported commodities are covered under LBT. This might affect the prices of some commodities. While LBT will impact traders, it's unclear whether this impact will in turn be passed on to the consumers.

WHY THE STATE WANTS LBT

Traders want octroi to be scrapped, so LBT is the alternative. Traders had initially agreed to LBT.

Traders have to maintain books of accounts, which would in the long run mean more money from taxes to the BMC.

WHY TRADERS ARE OPPOSED TO LBT

Ø  All traders will have to register with the BMC.

Ø  They will have to maintain books and accounts of all their transactions.

Ø  Their accounts and transactions will be open to scrutiny. Civic inspectors can come and check the accounts on the premises, unlike octroi, where the checking was done at the check points.

Ø  They will have to deal with double taxation as they will have to pay LBT and value added tax (VAT).