Difference in sales tax affects bullion trade
By- Stavan Desai

A Fresh crisis entangles the bullion trade in the city. After the Classic Co-operative Bank’s pay-order scam and the missing gold biscuits case, now it is the difference in the sales tax between Rajasthan and Gujarat that is affecting the market. However, more than the tax difference, it is the absence of bullion trader Naresh Chowksi that has affected their business.

Though the difference arose a year ago in April2000, city-based bullion dealers have started experiencing its implications only now. In accordance with the decision taken at a high-level meeting attended by Finance Ministers of various states in New Delhi last year, the Government of Gujarat decided to charge a common rate of sales tax at the rate of

1.18 per cent. The earlier rate charged by the State was 0.5 percent. Rajasthan also followed suit but made a provision which helped traders escape the common sales tax rate. Therefore, traders there have to pay only 0.4 percent sales tax.

"The increase never affected us as Naresh Chowksi of K L Chowksi & Co used to supply us gold at prices even lower than those in Rajasthan," reveals a leading bullion dealer of the city. As reported earlier, Chowksi was known to sell bullion procured from nationalized banks at prices lower than those prevailing in the market.

Now, with the termination of bullion business by some of the nationalized banks and Chowksi’s arrest, city-based bullion dealers are being forced to buy gold from Mines and Minerals Trading Corporation (MMTC) and other institutions. But, this is proving expensive due to the difference in the sales tax between Gujarat and Rajasthan.

For instance, on Jume 8, the price of a 10 tola bar in Gujarat was Rs 50,700 while it was in Rajasthan, it cost from Rs 50,000 to Rs 50,200. "So, city bullion dealers are slowly shifting to Jaipur or are procuring gold from Jaipur at lower rates," disclosed Harshad Chowksi, Secretary of Chowksi Mahajan Mandal.

Highly-placed sources in the bullion market reveal that dealers. from Rajasthan visit the city to sell bullion to dealers here. The proceeds of the sale is then deposited in a city-based bank which is then transferred to Jaipur and. a cash-memo suggesting sale in Jaipur is prepared thereby evading payment of sales tax in Gujarat.

Before the rule was enforced, Ahmedabad International Airport used to handle 10,000 ten tola bars per day, but now it has reduced to 1,500 to 2,000 ten tola bars per day. Moreover, individual sales have also been affected as businessmen no longer buy gold from the city.

"Just two months ago, my firm used to handle about 1,000 ten tola bars everyday. But, now I barely manage to sell 2,000 ten tola bars in a week," discloses Dhanesh Soni, a leading importer of gold in the city. According to estimates, about 65 per cent of the city’s bullion business has shifted to Jaipur. This has also hit the State Government’s revenue. Last year, Customs and Central Excise Department had collected Rs 700 crore from the bullion industry.

The State Government gained Rs 70 crore. Now, many leading bullion dealers doubt if the State Government will manage to earn even half of this amount this year.

Republished from The Inidian Express