4 states agree to uniform tax of 1% on bullion

Correcting a serious anomaly in the value-added tax (VAT) 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 1 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 1 per cent 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 1 per cent, while Delhi has also promised to bring it back to 1 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 R K Verma said.

"Gujarat had announced that it would incerase tax on bullion to 1 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 1 per cent," Dasgupta said, adding Uttar Pradesh representative also agreed to raise tax on bullion to the same level.

He said the Delhi finance minister A K Walia also assured to bring back VAT on bullion to 1 per cent if Rajasthan increases the sales tax on precious metals to the same level.

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

At present, Rajasthan and Gujarat have imposed 0.25 per cent sales tax on bullion, while Uttar Pradesh has 0.15 per cent sales tax.

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