The LBT, which is among the largest revenue sources for these municipal bodies, is being withdrawn from 25 municipal corporations, except Mumbai, from August 1. The LBT was introduced in phases from 2010 to replace the much reviled octroi.
To scrap the local body tax (LBT) levied on traders from August 1 and compensate losses to municipal corporations, the state government has decided to pass on its own stamp duty collections to them. However, the state is still undecided on continuing with the LBT for large industrial houses and traders in municipal corporation areas which have an annual turnover of over Rs50 crore.
The LBT, which is among the largest revenue sources for these municipal bodies, is being withdrawn from 25 municipal corporations, except Mumbai, from August 1. The LBT was introduced in phases from 2010 to replace the much reviled octroi.
Finance minister Sudhir Mungantiwar told dna that they had decided to devolve stamp duty collections to civic bodies in the respective cities. “Though the LBT will be scrapped… exempting traders with a turnover of over Rs50 crore is yet to be decided,” he added, saying that a meeting with traders about this would be held in a day or two.
The state urban development department has sent a proposal to the finance department to continue with the LBT for around 450 such high-turnover industries and traders which account for a huge chunk of the collections of this levy.
In his maiden budget speech this year, Mungantiwar had announced that the faith-based LBT would be scrapped from August 1. Before the state assembly elections, the BJP had supported the powerful traders' lobby's demand to scrap the LBT.
The state government has also approved supplementary demands worth Rs2,098.40 crore in the monsoon session of the state legislature to cover the expenditure from August to December for state assistance to municipal corporations in lieu of the LBT. This is being done as an enabling provision and to prevent withdrawals from the state’s consolidated fund.
However, the decision to compensate the municipalities for loss of revenues will burden the already cash-strapped state government. Maharashtra is groaning under Rs3.38 lakh crore loans and borrowings and the debt servicing burden amounts to an annual Rs27,000 crore.
Before octroi was scrapped, the 26 municipal corporations in Maharashtra collected around Rs14,000 crore under that head, with Mumbai accounting for the largest chunk.
The new system will be in place for a few months only as the Centre is looking to introduce the Goods and Services Tax (GST) from April 1, 2016. The GST aims at creating a single, unified tax for goods and services across India, replacing central excise, VAT, octroi and entry tax. It will boost the manufacturing sector and accelerate the state's ‘Make in Maharashtra’ plans.
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