From Saturday, more than 8 lakh traders in Maharashtra, except Mumbai, will not have to pay local body tax (LBT), which was levied across 25 municipal corporations.
The new system, however, will be in place for only a few months only as the Centre plans to introduce the Goods and Services Tax (GST) from April 1, 2016, which will create a single unified tax for goods and services across India. The GST will replace central excise, VAT, octroi and entry tax.
On Friday, chief minister Devendra Fadnavis announced in the state Assembly that the government will compensate the losses that the municipal corporations will suffer because of the withdrawal of LBT.
The state will pass over stamp duty collections worth Rs 7,648 crore, calculated by taking the average of the past five years and a 8% annual increase into account, to the civic bodies.
“The traders who have a turnover of less than Rs 50 crore will benefit from scrapping of the LBT. Only a small percentage, about 0.15%, will not be able to avail of this benefit. Mumbai, however, is excluded from this,” Fadnavis said.
The chief minister said a provision of Rs 2,048 crore has been made in the supplementary budget to ensure that the municipal corporations remain financially independent and do not compromise on their ongoing works.
The Opposition expressed unhappiness on the decision, saying they will oppose the decision. “Are you going to have some different taxation for tax rural areas? These people are already under huge debt and facing water scarcity they should not be asked to pay more. We will oppose this decision,” said Opposition leader Radhakrishna Vikhe Patil.
Scrapping the LBT will add to the Rs 3.38 lakh crore loan and borrowings and the debt amounts to an annual Rs 27,000 crore, which will further burden the state exchequer.
LBT was introduced by the previous Congress and Nationalist Congress Party (NCP) government with a view to replace octroi.
The trader community, however, had opposed the new tax, claiming claim that the LBT would lead to double taxation and increase their paperwork.