Delhi to abide by VAT panel decision on bullion

A few days ahead of the VAT panel meeting, the Delhi government has indicated that it will not lower VAT rate on bullion from one per cent to recover the trade that has shifted to Rajasthan and Gujarat unless the empowered committee agrees to it.

"At the moment, we will not take any decision to lower tax rate on bullion unilaterally without the consent of the empowered committee," said Shiela Dikshit,chief minister,Delhi.

The empowered committee is scheduled to meet for two days from october 4.

Dikshit expressed concern that Delhi was losing bullion trade to Rajasthan and Gujarat since sales tax in the two non-VAT states was 0.25 per cent against 1 per cent VAT rate in the national capital.

She also expressed her government's helplessness to stop the shift in the trade, saying," we have raised the matter in empowered committee. I also took up the matter with VAT panel chairman Asim Dasgupta. But Rajasthan and Gujarat are not agreeing."

The chief minister said her government would abide by empowered committee's decision in this regard.

Delhi would lose about Rs 40 crore because of shift in bullion trade to Rajasthan and Gujarat this fiscal, according to state sales tax commissioner R K Verma.In past few months, Delhi had threatened many times to lower VAT rate on bullion from 1 per cent, but did not do anything in this regard.

The VAT panel had asked every state to impose one per cent tax rate on bullion from august 1. This had pacified the Delhi government which had said it would wait till August 1 before taking any decision on lowering VAT rate on bullion from 1 per cent.

States, however, missed the deadline with both Rajasthan and Gujarat not increasing sales tax on bullion to one per cent by August 1.

But Delhi finance minister A K Walia, on the request of Dasgupta, refrained from lowering VAT rate on bullion till the next meeting of VAT panel.

At the meeting on August 24, VAT panel has asked Delhi to wait for some time so that Rajasthan and Gujarat could be persuaded to increase sales tax on bullion to 1 per cent.

Delhi then deferred any decision on VAT rate on bullion by 15 days.

More than a month has passed but the Delhi government has not taken any decision in this regard.

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

Maharashtra, which was also losing out due to the shift in bullion trade to Gujarat and Rajasthan because of tax differences, expressed resentment at VAT panel's inability to prevail upon the two states to impose 1 per cent sales tax on bullion.

In fact, the centre should intervene and leverage its discretionary grants to states to make them abide by the empowered committee's decision, Maharashtra sales tax commissioner B C Khatua had said after the meeting.