High stakes in Maharashtra Govt, traders standoff over local body tax

It is a warm Thursday morning and in the first class compartment of a local train heading to down-town Mumbai, a group of traders from suburban areas sport a blue coloured badge on their chests that reads “I OPPOSE LBT.”

The group, most of whom are Gujarati traders, is headed to Azad Maidan – a place that has become synonymous with protest meetings for people with varied demands.

The Local Body Tax or LBT, which will become effective in phases across Maharashtra, has become a bone of contention between the Congress-led Maharashtra Government and traders. In retaliation to the State Government’s refusal to roll back the enforcement of the tax, traders selling grocery, textile, steel and metals have downed shutters.

The LBT rate varies from 0.5 per cent to 8 per cent for different category of goods.

According to an estimate given by Mumbai Textile Merchants’ Association President Surendra Savai some 30,000 traders attended the protest meeting on Thursday.

He put the turnover loss at Rs 75,000 crore across the State due to the strike that has been on going in phases for over 20 days now.

A DRACONIAN LAW?

The anatomy of the strike is led by a fear psychosis that runs almost uniformly among traders, especially the ones operating mom and pop stores across the State.

The LBT seeks to replace Octroi tax that is currently in force and is levied on certain goods at multiple check points in different cities. The tax requires traders, small and big, to maintain accounts on sale and purchase of goods on which the tax will be levied.

The government claims the new levy will help expand the tax base, check tax evasion and will ease traffic at multiple check-points. Traders fear that the new account-based tax will put them at the mercy of local officials, who can intermittently call for the account books to be examined. Also, traders claim that LBT provisions empower local officials to penalise a defaulter for petty violations.

The LBT seeks to bring even petty traders who bring raw materials or goods from outside the State into the tax net. Any goods that are brought into the State either for use or for sale will be taxed at a local level. The collections from this tax will form the source of revenue for local civic bodies.

STATE vs TRADERS

The State Government and traders are attacking one another by using media to put forth their view point.

The Municipal Corporation of Greater Mumbai ran a big advertisement in major newspapers on Saturday seeking to inform consumers about the main benefits of the tax.

The advertisement mentioned transparency, no-additional burden and barrier-free tax as the unique selling points of the levy.

The Federation of Association of Maharashtra, on the other hand, slipped in a pamphlet between the newspapers on Friday telling the consumers how they will be hurt with additional taxation and cost inflation, if the tax is imposed.

The Supreme Court, disposing of a public interest litigation filed by the Federation of Trade Associations of Pune, refused to stay the implementation of the tax. It referred the issue to the Bombay High Court and asked it to decide on the issue within four months.

Meanwhile, Congress’ ally in the State Government – the Nationalist Congress Party – has sought a co-ordination committee meeting to discuss the LBT law again. The Bhartiya Janata Party, Shiv Sena and the Maharashtra Navnirman Sena have thrown their weight behind the traders. The State will go into polls shortly after the general elections in 2014.

PARTIAL SUCCESS

The traders’ strike has met with only partial success as can be witnessed from the string of shops that are open amid closed shops in the city.

However, Savai claims that people joining their strike is growing by the day.

In some cases, there have been local reports of traders’ association forcing fellow businessmen to join the strike.

A trader, who runs a small grocery store near Kurla station said, “I had kept the shop shut yesterday. Even bigger retailers are open now. So, I also opened the shutters. The LBT is bad… everybody knows that.”

To be sure, the traders’ association at least formally are not opposed to the tax regime. They are opposed to a new system being put in place for the tax collection, which they fear will render them helpless in the face of harassment from local officials.

They have instead proposed a surcharge on value-added tax, which can be distributed among the local bodies.

The State Government in its advertisement opposed this saying that such a mode of tax collection will result in putting an end to the financial autonomy of the Municipal Corporations and affect their ability to finance capital projects, which will be against the spirit of the 74th Amendment of the Constitution.”

satyanarayan.iyer@thehindu.co.in

rahul.wadke@thehindu.co.in

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