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4 states to have uniform bullion tax

Official committee prevails upon Delhi, Rajasthan, Uttar Pradesh and Gujarat to maintain uniform tax rates on bullion.

india Updated: Jan 30, 2006 18:32 IST

Correcting a serious anomaly in the Value-Added Tax structure, an official committee today prevailed upon Delhi, Rajasthan, Uttar Pradesh and Gujarat to maintain uniform tax rates on bullion.

All the four states agreed to impose one per cent VAT or sales tax on the precious metals, which would provide a major relief to Delhi, which has been losing considerable amount of bullion trade to states where a lower tax regime prevailed.

Delhi had earlier this month decided to bring down VAT on bullion from one to 0.1 per cent, a slab that does not exist under the new tax regime.

Gujarat, Rajasthan and Uttar Pradesh have agreed to raise the tax rate on bullion to one per cent, while Delhi has also promised to bring it back to one per cent, Empowered Committee on VAT Chairman Asim Dasgupta told reporters after a two-hour meeting of the panel.

Though Delhi had decided to lower VAT rate on bullion, it has not notified its decision, state VAT commissioner RK Verma said.

"Gujarat had announced that it would increase tax on bullion to one per cent as soon as possible. After hearing that, Rajasthan representative said the state will also do the same if other adjacent states increase it to one per cent," Dasgupta said, adding Uttar Pradesh representative also agreed to raise tax on bullion to the same level.

He said Delhi Finance Minister AK Walia also assured to bring back VAT on bullion to one per cent if Rajasthan increases the sales tax on precious metals to the same level.

Though Dasgupta did not disclose the time frame of implementing this decision, sources in different states said it would be done from March one, this year.

Because of this, bullion trade is increasingly being shifted from Delhi, which has so far lost Rs 40 crore on this account.

The decision of Delhi Government to impose 0.1 per cent VAT on bullion would have required an amendment to its VAT Act since this slab does not exist in the VAT structure.

Though Rajasthan, Uttar Pradesh and Gujarat have so far not implemented VAT, they are required to abide by the uniform floor rate of taxes, which is one per cent in case of bullion.

Meanwhile, Dasgupta disclosed that reveneue growth due to VAT has been close to 16 per cent since implementation of the new tax regime from April 1, 2005 against historical trend of sales tax revenue growth of 12 per cent in the last five years.

Denying that there is a huge divergence of tax rates among VAT states, he said deviation is not more than three per cent.

Industry body FICCI, however, had on Sunday came out with a survey which revealed that there is a huge divergence of tax rates on similar products in VAT states.

To a suggestion by Delhi Finance Minister AK Walia that Delhi be allowed to lower VAT rate on biscuits from 12.5 per cent to 4 per cent on lines of other states, Dasgupta said alteration in tax rates cannot be allowed at the fag end of this fiscal.

On inability of certain manufacturers to bring down prices of those items, where VAT rates are lower than earlier sales taxes, he said the committee asked states to have a meeting with regional associations of manufacturers to prevail upon them to reduce prices.

On reducing CST to 2 per cent from next fiscal against 4 per cent at present, Dasgupta said the committee would present a note to the Finance Ministry on compensation to states which would lose revenue because of it.

He refused to divulge details of the note, saying it is a matter of budgetary concerns.

On shortage of 'C' forms, required for claiming CST refund, he said the availability of the forms has increased. "There is some ground level problem and we are committed to taking care of it," he said.

On BJP-ruled states' indications to switch over to VAT regime, he just said they showed positive inclination but did not give the timeframe.

He also said registration of dealers have increased after implementation of VAT by majority of states. Echoing Dasgupta, the Delhi VAT commissioner said registration of dealers have gone up by 10,000 to around 1,70,000 in the national capital.

First Published: Jan 30, 2006 18:07 IST