Delhi to raise bullion trade shift issue with VAT panel

The Delhi government will raise the issue of the bullion trade shifting to Rajasthan, owing to lower tax, in the next VAT committee meeting. The meeting is expected to take place sometime around June 15.

"We have urged the empowered committee to arrive at a concrete decision on the issue. We will raise the issue in the next meeting of the committee. We can not let the bullion trade shift out of Delhi," Delhi Finance Minister A K Walia said.

Bullion attracts 1 per cent value-added tax (VAT) in Delhi, while in Rajasthan it attracts only 0.25 per cent sales tax. The Delhi government had reduced the sales tax on bullion to 0.25 per cent in January before implementing VAT.

The state government has already written to the chairman of the empowered committee, Asim Dasgupta, on this issue.

A state government official said if the empowered committee did not address the issue, then Delhi would be forced to reduce the tax rate on its own, to bring it at par with Rajasthan.

According to the white paper on VAT, there are only four VAT rates""0 per cent, 1 per cent, 4 per cent and 12.5 per cent ""on various items. Gold and silver are taxed at 1 per cent under VAT. Unless the empowered committee comes out with a new rate structure, the Delhi government will either have to put the bullion in the 0 per cent category, or to keep it out of VAT to tax it at a different rate.

Bullion traders in Delhi say the trade had declined 70-80 per cent and most of the trade was now taking place in Jaipur. The business being a "low volume but high value" type, only a 0.75 per cent rate difference matters significantly, according to traders.