The financial capital of the country came to a standstill on Monday, after the retail traders here called for an indefinite strike against the imposition of Local Body Tax (LBT).

According to the figures claimed by the Federation of Retail Traders Welfare Association (FRTWA) more than one lakh shops, except for medical stores, remained close on Monday. The shut down meant the loss of approximately Rs 500 crores. A section of wholesale market traders is already on strike against the imposition of LBT.

“Our demand is that traders wants to pay tax for corporation but not in the form of LBT which brings inspector raj and double taxation and double registration,” said Viren Shah, President, FRTWA. He said that the traders are demanding ‘no LBT’ but are ready to pay tax in the form of VAT as surcharge or city development charges or any other way under VAT.

Meanwhile, remarking that only a section of traders were evading responsibility for the LBT, Maharashtra Chief Minister Prithviraj Chavan said that he is firm on implementing the LBT across the state.

“This [the LBT] is a progressive tax. The octroi system has become outdated…Some traders like those dealing gold and silver are taking the lead in opposing the LBT, but the government will not backtrack,” Mr. Chavan told reporters in Mumbai at the Vidhan Bhavan, adding that the LBT was not new and was introduced on April 1, 2010 only after extensive deliberations with traders.

The issue has polarized traders and the state administration with the bodies like the Federation of Associations of Maharashtra (FAM) (a state-wide traders’ body) holding hectic parleys with the Chief Minister and State authorities on the issue.

On Saturday, after a meeting with Mr. Chavan, Minister of state (MoS) for Communication and Information Technology Milind Deora suggested that a committee of 10 members - five IAS-level officers and five traders from the FAM – be constituted to resolve the deadlock between the traders and the state government.

The Chief Minister reiterated that the objective of introducing LBT in lieu of octroi was to make the municipal corporations in Maharashtra financially stronger.

To this end, Mr. Chavan has authorised the state’s municipal corporations to decide the rate of the LBT.

Instead of LBT, the traders have demanded a 1 per cent surcharge on the levy of the Value-added Tax (VAT).

“But this would imply putting pressure on the rural areas of the state which was not acceptable,” Mr Chavan observed, remarking that that the government had discussed the issue time and again with traders to remove misconceptions.

He reiterated the changes that the government had earlier announced in the assembly in the tax, notably that small traders with an annual turnover of up to Rs 3 lakh need not pay LBT.

The government had also pushed back the payment date of the LBT from the 10th to the 20th of every month.

Mr. Chavan also expressed that it was the State administration’s fervent desire that traders shift to account-based tax collecting systems.

The Chief Minister also rubbished any suggestions of a rift between the Congress and the NCP on this matter, alleging that handful of people were misleading businessmen on the LBT. He also urged opposition parties to desist from politicizing the issue.