The Hindu : Business : Delhi may slash VAT on bullion

Online edition of India's National Newspaper
Wednesday, Aug 24, 2005

Business

Business

Delhi may slash VAT on bullion

Special Correspondent

Maharashtra seeks compensation of Rs. 250 crore for first quarter

NEW DELHI: Delhi and Maharashtra governments are set to slash the value added tax (VAT) on bullion to 0.25 per cent as a consensus on having a uniform floor rate for precious metals may elude the Empowered Committee at its meeting on Wednesday.

"At the moment, consensus does not seem to be emerging on the issue at the VAT panel's meeting on Wednesday. If there is no consensus, we will also reduce VAT rate on bullion to 0.25 per cent," the Finance Minister of Delhi, A. K. Walia, said on Tuesday.

Speaking in the same vein was the Maharashtra Sales Tax Commissioner, B. C. Khatua, who emerged from the first day's meeting of the panel and said: "We will first try to evolve a consensus on the issue, but if that does not happen, we will be forced to lower the VAT rate on bullion."

Tuesday's meeting, attended by the Chairman of the Empowered Committee, Asim Dasgupta, was essentially an interaction of the state sales tax commissioners on the eve of the detailed discussions with the State Finance Ministers on Wednesday.

The slash in VAT rate on bullion by Delhi and Maharashtra governments is considered necessary as the trade has started shifting from the two states to Rajasthan and Gujarat owing to the difference in tax on precious metals.

While Delhi and Maharashtra currently have one per cent levy as VAT on bullion, Rajasthan and Gujarat charge a sales tax of 0.25 per cent on the precious metals, as they have not implemented the VAT system as yet.

Trade diversion

Both Maharashtra and Delhi stand to lose about Rs. 40-50 crore because of the shift in bullion trade.

According to the Delhi Sales Tax Commissioner, R. K. Verma, even if the VAT rate on bullion were cut to 0.25 per cent, it would take at least another three months for trade to come back to Delhi. Meanwhile, Maharashtra has decided to seek a compensation of Rs. 250 crore from the Centre for the lower than projected revenue generation owing to VAT during the first quarter this fiscal.

According to Mr. Khatua, Maharashtra garnered Rs. 2,451 crore from VAT items during the first quarter against a projection of Rs. 2,701 crore. The State would submit its claims to the Centre this weekend or next week, he said.

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