Note On LBT Applicability


LBT department has started to received assessment notice under Rule 25(5) & 25(7) of the Maharashtra Municipal Corporation (Local Body Tax) Rules 2010 for difference Assessment Year.

Way Forward For STPI Unit:

Following way forward can be considered by the STP Unit:-

1. IT & ITES Units are Exempt from LBT: –

  • The company is a registered IT & ITES unit. As per the Maharashtra IT & ITES Policy, STP units are exempt from levy of LBT. The said policy is the State declaration and must override the levy as prescribed by LBT Act.
  • As per policy, it is provided that State Government will issue exemption notification in this regard. However, we are unable to find any Exemption Notification in this regard.  In view of non- issuance of Notification, we are of opinion that Exemption provided by the Policy will have the sanctity and Company shall be eligible to avail the exemption on the basis of State declaration on LBT exemption.

2. Exemption by the SEZ Act: –

  • On the same line, SEZ Act also provide the exemption to SEZ unit from local taxes| levies| Cess (Section 26 of the SEZ Act).

3. Exportation of Services: –

  • Further, it is also pertinent to note that STP Units are mainly engaged in the exportation of Services to clients situated outside India. As per the provision of LBT Act, any goods which has been used for the purpose of exportation of Goods. This exemption/ refund is applicable to Goods; However, said exemption should be extended to Services as well because of Policy of Indian Government i.e. “Only goods or services must be exported not the taxes”.

4. Basis of Computation of Demand: –

  • The basis of computation of demand adopted by the Assessing Authority may be incorrect. The Authority may take all expenses like Office Expenses | Staff Welfare Expenses and deemed that 50% of such expenses include Goods imported outside the Municipal Limits. On such deemed goods, authority may try to levy the LBT.
  • The stand/ computation is totally wrong and Authority must see the exact amount of goods imported for the purpose of levy of LBT.

5. Complication/ Financial Exposure: –

  • The Assessing Authority may not convince with exemption provided by the IT & ITES Policy in view of non-availability of Exemption Notification. In this case, Assessment authority may issue the demand notice to recover the LBT along with interest and penalty.
  • In case of demand notice, the STP unit can file an appeal before the appellate authority; However, said appeal can be entertained by the appellate authority only after the payment of disputed demand. In such situation, the company may have financial exposure of demand as raised by the Assessing Authority.

However, this can also be waived through the write petition before the High Court through a counsel.

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