The Devendra Fadnavis Government in Maharashtra has scrapped the controversial Local Body Tax (LBT) in the State, effective August 1.
Making the announcement in his Budget speech, Finance Minister Sudhir Mungantiwar said the Value Added Tax will be raised to compensate municipalities for the loss of revenue of Rs 6,875 crore.
The LBT was introduced in April 2013, replacing Octroi in all municipal corporations except Mumbai.
Traders opposed it claiming that it will increase tax levels and lead to harassment by municipal inspectors. In the run-up to the Lok Sabha and Assembly elections last year, the Bharatiya Janata Party promised to abolish the LBT if voted to power. “The enhanced rate of VAT will be applicable to the whole State. A revenue neutral rate has been recommended considering the share of increased tax collection to be given to the areas where Local Body Tax is not levied,” Mungantiwar said, without disclosing the quantum of increase.
Double whammy For Mumbaikars, the VAT hike will come as a double whammy as the Octroi levy remains in force in the city.
Harshad Shah, core committee member of the Federation of Association of Maharashtra, a traders’ body, rued that no amnesty scheme has been announced for traders embroiled in various LBT-related litigations.