VAT takes shine away from Rajasthan's gold trade

The Rajasthan government's decision to implement the value-added tax (VAT) from April 1 in the state is being perceived as detrimental to gold trade in the state. Local jewellers said the implementation of VAT would reduce the annual turnover of gold trade by over 60 per cent in the state.

The existing composite tax scheme in the state accounts for less than 1 per cent of sales tax, which is one of the lowest in the country. But after the implementation of VAT traders will have to give 1 per cent of uniform tax, which would bring them at par with other parts of the country.

"Today Jaipur alone accounts for a yearly sale of about Rs 10,000-15,000 crore worth of gold and it has been only possible due to the composite scheme because of which most of the domestic and foreign buyers prefer to buy gold from Jaipur. But the implementation of 1 per cent uniform tax over gold will bring the gold market here at par with rest of the country and buyers will have several options to buy gold from any part of India," said a local jeweller.

"I feel that implementation of VAT in the state is expected to account for a steep reduction in the total sales of the gold. As per my estimate the total sales of gold would reduce by over 60 per cent," he added.

After the implementation of VAT traders from outside the state may start purchasing gold from other parts of country, which will eventually bring down gold sales in Rajasthan.

Gold was included under composite or composition scheme in 2004 under which 19 slabs were initially fixed for the computation of the sales tax on gold. Under the composite scheme on an average a meagre slabs of between 0.10-0.30 per cent depending upon turnover was applicable.

"Composite scheme has proved to be a life support system to the jewellery trade in the state. Daily consumption of gold in the state is expected to be about 500 to 550 kg gold but after the implementation of VAT this figure is expected to hover around 100 to 125 kg per day," another jeweller said.

He said the state government should come up with some effective measures to support the gold trade.