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Nagpur City No 1 eNewspaper : Nagpur Today

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Published On : Sat, Dec 14th, 2013

Massive LBT evasion by Computer dealers in Nagpur; Authority assures action soon

lbtNagpur News.
Even as the traders lobby against local body tax (LBT) and called a city wide strike on Friday, other side of the picture reveals the massive evasion of the newly enforced tax that was brought into existence in place of octroi. Among the big evaders include the traders that deal in computers and related electronic goods. While the cash strapped Nagpur Municipal Corporation (NMC) is struggling to cope up with its drying accounts, a massive evasion of LBT by the computer dealers in the city has come to light. The reason behind the squeezing NMC exchequer is not due to the imposition of LBT but for the non-payment of this newly applied tax.

Assistant Commissioner, LBT Mahesh Dhamecha has recently raided few big evaders however the evasion that was unearthed was just a flash in the pan, given the quantum of various such murky deals across the city. When Nagpur Today contacted Mahesh Dhamecha about the massive LBT evasion by the computer dealers in the city, he said, “Some of these activities have even come to my knowledge and I am planning to inquire further into it. This could be true that such computer dealers are not paying either LBT or VAT and running their business on their own free will.”
“Since today is the traders strike against LBT, all the business establishments are shut down but I will certainly look into the matter,” Dhamecha told Nagpur Today.

About the strike against LBT, he said that the reason which he see behind the protest is that now the traders will have to bring their every sale and purchase on record, while it was not so at the time of octroi. “When the octroi was into existence, the traders had to pay only at toll booth and move on. This way they can get off from maintaining record of their sale and purchase. Now this appears to be their bone of contention as they will no longer be able to hide anything”, he said.

However, a group of computer traders have reportedly found the way out. Sources told Nagpur Today that most of the computer dealers running their business in Dhantoli area of Nagpur are involved in getting their goods directly from the grey market without the interference of the distributor, and skip off maintaining the records and easily evade LBT.

Most of these dealers get computers and its parts from Mumbai, Delhi and Chennai which is imported from countries like Dubai, Singapore and Malaysia where all these goods are available Duty Free. The goods include branded personal computers (PC) and lap tops, assembled personal computers and accessories that mainly include printers & networking products

An estimate shows that 5000 to 6000 personal computers are sold across Vidarbha in a month. While in Mumbai the sale is 73000 personal computers per month and in Pune the sale figure stands at 18000 – 20,000 personal computers.
Mix of legal and illegal purchase

The data obtained by Nagpur Today states that only 3000 lap tops and branded PCs are sold in the city every month with the LBT and other taxes paid. However, most of the dealers who purchase raw material for assembling the computers go scot free without having to pay any tax and they have developed fool proof mechanism to ditch the LBT.
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The goods that these unscrupulous dealers and traders bring mainly include processors, mother boards, hard disks, ram etc. The major tax shuffling is done in these products only. These are bought from the grey market at 10 to 20 per cent less than the original costs. Interestingly only those goods are purchased from the grey market that turns out profitable while those available at prices as low as Rs 1000 are brought from the distributor. These include key boards, DVD writers, cabinets etc. “This way they make a perfect mix of legally and illegally purchased goods which helps them to avoid any action.”

Bill on ex-Wadi delivery
These unscrupulous dealers issue or give a bill that shows the product as ex-Wadi delivery making it look like the product has not attracted any LBT, while most of these computers are sold from the showrooms only. These dealers allegedly bring goods in large numbers and pay the LBT which the National Distributor reimburses. These dealers then sell 50 per cent to retailers or customers outside city limits or in Chhattisgarh or Madhya Pradesh without any bill. This way he has saved 50 per cent of money which he would have had to pay as LBT to NMC. To add to this LBT evasions, these traders blatantly sell it to the regional distributors and dealers in Madhya Pradesh and Chhattisgarh saving VAT money in other states. They are transported by leading Travels of the city.

How traders evade taxes, save on fake bills
This dealers save LBT which the National Distributor has already reimbursed, 2-3 % by giving bills for goods a retailer has never sold and another 4% of VAT and get off unnoticed. For example if he sells computer 3-6 percent less than the original value since he has already recovered it by evading LBT, VAT and other ways, he will certainly book more profit against his sale. However in this process, these unscrupulous dealers are disturbing the Market Operating Price. This ensures regular and more customers than other registered shops (abiding all legal taxes and LBTs). Any customer getting goods for lesser amount certainly visits again and spreads the news of cheaper goods through the word of mouth too. These unscrupulous dealers have their shops and business establishments concentrated in Dhantoli area.

Why big fish being spared
What is surprising is that the Municipal Authorities are raiding small shops and business establishments or those showrooms with high end good, where no or few customers visit, while big fishes earning in crores (in the bracket of 120 to 300 Crores per annum) are in the lake yet to be caught. Is it that NMC has failed to notice them or is it that they are not aware of the blatant violations or better still, have they some arrangements to turn a blind eye towards them.

With these unscrupulous dealers doing brisk business blatantly violating all rules and regulations, the dealers who abide by all the rules and regulations, pay all the taxes and LBT, feel cheated. They are left high and dry not even able to meet the required sales target.

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 – By Samuel Gunasekharan

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