LBT is a draconian Act, especially with key words like ‘goods’, ‘dealer’, ‘business’ loosely defined in the legislation, giving enough scope for the administrators to stretch their imagination to fanciful limits to the common man’s harassment and dismay
With the wedding season round the corner, imagine you are going in your car from Navi Mumbai to Mumbai to attend a marriage with your wife who is wearing gold ornaments and a silk saree; please do not be surprised if a government officer stops you and demands LBT on the car, saree and gold ornaments. Your luck may run out further, if he invokes the provision saying that you have failed to take a registration under LBT (Local Body Tax Act). He may demand, in the name of penalty, a compounding fee, that may exceed the cost of the ornaments or the car or the saree itself. You may, along with your wife, be convicted for the offences you may have deemed to have committed under LBT.
Another reason which goes against LBT is the exorbitant compounding fees. The Bombay Provincial Municipal Corporations Act, 1949, the Act that gives right to levy LBT, as such does not have a penalty-limit prescribed for any violations relating to LBT, though there is an elaborate Annexure prescribing the various penalties. That shows that penalty cannot be levied legally.
The Act is not a comprehensive Act that is well worded or suited for taxation. With lot of alternative avenues open for collecting enough revenues for the corporations, the political class should respect the difficulties of the businessmen and common men, and help them to reach the sane voices (if there are any!) in the government. They should bring in the changes in legislation to repeal LBT and make suitable changes in VAT so that the local bodies do share revenues the state government derives from VAT. This will ensure that the administration frees itself from the task of collection of addition tax and other related administrative work. This will also help the dealers of additional hassles of payment of tax, filing of return, surveys, raids, check posts, assessments, appeals etc. and also dealing with one more Government body prone to corruption. 
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This is for the public to decide whether they will keep the present Govt. in power and then equate the recovery process.
As per C.M. :
Increasing VAT is going to extra burden on small villages/ towns etc. When Congress increased VAT from 4% to 5% then? Have they thought of same at that time ? Now what is harm today? Collection of VAT from said area is hardly 10% to 15%. Not going to make much difference to them.
LBT applicable to Big Cities only. So it is not going to effect Villages/ Towns. All villages / small town, have to depend upon big cities. They have to buy most of the requirements from big cities only. Thus indirectly they are paying LBT.
Keeping pro and cons of LBT aside, basic and fundamental question- Is Municipal Corporation is geared up to implement dynamic nature taxation at such micro level? BMC record is not so good in handling static tax like property tax, water bill and octroi? Law passed without adequate implementation machinery and understanding will be breeding ground for corruption and harassment to traders, whose cost, ultimately will be borne by us.
Sad part about entire episode is poor communication from Government.
What this article does not highlight sufficiently is that the focus of the traders agitation is NOT against levy of LBT itself - it is purely against the MODE of collection of LBT. All they want is that the additional tax amount should be collected as a surcharge on VAT, without having to file separate returns or be subject to harassment by yet another authority.
The very fact that the govt is not agreeing to such a rational demand proves that the govt has vested interests which are far more and deeper than the mere revenue.
After all, octroi provided so much unauthorized income to the octroi officers, so this is sought to be replaced by this underhanded route.