Rajasthan tax hits gold trade

By Our Staff Reporter

NEW DELHI, JUNE 13.

The unjustified decision of the Rajasthan Government to stick to the sales tax rate of 0.05 per cent on gold has not only badly hit gold trade in the Capital, but also resulted in a spurt in smuggling of the yellow metal from the neighbouring State.

While gold attracts sales tax of one per cent in the Capital, the Rajasthan Government, as part of an incentive scheme and contrary to the spirit of Uniform Sales Tax, is levying only 0.05 per cent sales tax on the gold bought by traders from Handicrafts Associations, Minerals and Mines Trading Corporation (MMTC), State Trading Corporation and the nationalised banks. This has hit the bullion trade badly in Delhi resulting in exodus of traders and outflow of revenue.

Officials are of the view that if the Rajasthan Government is not forced to adopt the new uniform rate, it would not only have an adverse impact on the overall revenue collections but also result in large scale smuggling of the commodity. Already the impact of smuggling is being felt as the official trade in Delhi has recorded a massive decline as a result of gold being smuggled from Rajasthan.

Under pressure from the traders to bring down the sales tax rate, the Delhi Government is of the view that if Rajasthan does not revert to the one per cent rate, Delhi too would be forced to take a decision which could have an adverse fallout on the country-wide level.

In fact, the issue was raised by the Delhi Finance Department officials and the Finance Minister of Delhi, Mr. Mahinder Singh Saathi, at a meeting of the Coordination Committee on Sales Tax held in Delhi on June 7. It was pointed out that after the entire country had adopted the uniform floor rates, it was not right on the part of Rajasthan to continue with the old rates for gold which had resulted in uneven competition.

In fact, Bullion Traders Association, Delhi, has blamed the Delhi Government for not studying the facts and going ahead with the decision to implement the new rates. They claim that many traders have shifted trade to Rajasthan as the demand had come down by 70 per cent in the month of May. As for June, the situation was even worse.

They alleged that despite making representations to the Delhi Finance Minister, nothing has happened and warned that they would be forced to take the drastic step of launching an agitation. Officials in the Delhi Government said they had already got in touch with their counterparts in Rajasthan and have sought an immediate solution to the problem. The response from Rajasthan was quite positive and it was hoped the anomaly would be removed very soon, officials added.

At the same time, officials in the Sales Tax Department refuted the allegations of the traders and instead charged them with adopting a callous attitude in this regard. ``A representation of the Bullion Traders Association met the Sales Tax Commissioner only last week and informed him about their problem. The notification was issued by Rajasthan in November last year. What were the traders doing all these months?'' a senior official asked.

Acknowledging that the grievance of the traders was to some extent correct, the official wondered what took so long for the traders to take up the cause. The uniform rates came into effect from January 16 and it took nearly five months for the traders to react. It was only when their trade started getting affected that the traders woke up to the reality.

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