Tax & Accounting Blog

Mumbai – Local Body Tax (LBT) Protests

Indirect Tax, Transaction Tax May 10, 2013

For days now shops in Mumbai have been closed as merchants protest the introduction of the controversial Local Body Tax (LBT). The Bandh (A general strike used by political activists in Asian countries as a means of protest – the term comes from a Hindi word meaning “closed.”), has resulted in a near complete shutdown of retail establishments including grocery stores and restaurants resulting in an estimated loss of revenues of Rs 75,000 crore.

In addition to keeping their businesses’ closed, the merchants say they will remit only five per cent of the Value Added Tax payable until the issue has been decided. The protesters would like to see the LBT combined with the existing taxation regime as a surcharge on VAT rather than as a separate tax. Chief Minister Prithviraj Chavan ruled this out as a possibility earlier this week stating that “The demand for additional surcharge on VAT will amount to people in rural areas having to pay for those in the cities.”

The LBT was introduced in Maharashtra earlier this year to replace OCTROI and is currently in place in twenty-four municipal corporations in Maharashtra.  Mumbai and Nagpur are scheduled to start paying LBT later this year.