Gujarat ready to raise sales tax on bullion

NEW DELHI: Gujarat, one of the states that have weaned away bullion trade from the national capital with low sales tax, has indicated it would raise tax on precious metals to one per cent, after Delhi took up the matter with the VAT panel.

"We will do whatever the Empowered Committee (on VAT) asks us to do," Gujarat Minister of State for Finance, Saurabh Patel said.

Uttar Pradesh also said it would raise sales tax rate on bullion to one per cent, provided Rajasthan does so, State Agriculture Minister Ashok Bajpai, who represents the state in the Empowered Committee meeting, said.

He said Uttar Pradesh would lose around Rs 25 crore this fiscal because of shift in its gold trade to Rajasthan.

From September, Empowered Committee Chairman Asim Dasgupta would start meeting Chief Ministers of eight states, which are yet to embrace the new tax regime, to urge them to implement Uniform Floor Rates (UFR) on bullion.

If the VAT panel succeeds in convincing Rajasthan, Gujarat and Uttar Pradesh to raise sales tax on bullion to one per cent, Delhi would give up its move to lower VAT rates on precious items to woo back traders.

Delhi, along with states like Maharashtra, have complained to the Empowered Committee that its bullion trade is increasingly shifting to Rajasthan and Gujarat as these two states have 0.25 per cent sales tax on the precious metals against one per cent in the states that have implemented VAT.

Meanwhile, Uttar Pradesh has also introduced a composite scheme of 0.15 per cent sales tax on bullion.

Delhi would lose about Rs 50 crore because of shift in bullion trade this fiscal, while Maharashtra would lose around Rs 40 crore.

The VAT panel had earlier asked all states to impose UFR of one per cent on bullion by August one or face "administrative" action.

After this decision, Delhi Finance Minister A K Walia told reporters that the state government would wait till August one before taking a decision on lowering VAT rate on bullion from one per cent.

But states missed that dateline and the Empowered Committee too failed to recommend to the Centre to take action against the erring states.

On the request of Dasgutpa, Walia again set an August first week deadline for lowering VAT rate on bullion as VAT panel was expected to meet by that time.

However, the Empowered Committee's meeting was put off till August 24 and the Delhi Finance Minister again deferred the decision till then.

However, he had told reporters that he would not wait beyond August 24 and would lower VAT rate on bullion in case Gujarat, Rajasthan and Uttar Pradesh do not raise sales tax on bullion to one per cent.

The August 24 meeting also ended without any concrete decision on the issue and Walia said he would again wait for 15 more days to give time to Dasgupta to persuade the three states to introduce UFR on bullion.

However, Maharashtra representative and the state sales tax commissioner B C Khatua expressed disappointment. "We have not emerged any wiser from the meeting," he said.