The Hindu Business Line : Rajasthan doles out new ST sops for gold

RAJASTHAN could soon turn out to be the country's bullion capital, with the State Government introducing a new scheme that gives sales tax relief to dealers.

As per the notification on the Composition Scheme for Bullion and Sarafa Trade, sales tax incidence for an import value of Rs 100 will work out to be between 3 paise and 8 paise compared to Re 1 earlier. The scheme, also popularly known as the green channel scheme for bullion dealers, is with effect from April 1 last.

Superseding a Finance Department's notification, (No. F.4 (4) FD/Tax Div./99-227), dated May 7, 1999, the State Government has notified the scheme . The scheme will be applicable to the dealers of bullion, articles, ornaments and jewellery made of gold and silver or other precious metals. However, those with cases of evasion of tax against them would not be eligible for composition of tax.

The dealer will be subject to all the provisions of the Rajasthan Sales Tax Act, 1994,and the terms and conditions contained in this notification. As per the conditions, the dealer should not charge or collect any tax from a purchaser on the sale of goods during the composition period. He should not be entitled to claim any deduction, set-off, partial exemption or refund on purchases made by him.

Under the scheme, a dealer will pay a composition amount every year in lieu of tax. This will be determined as per the slab notified by the Government. In case the composition amount of the dealer is Rs 1 crore or more, he will have to make an advance deposit of Rs 25 lakh in cash and Rs 50 lakh in the form of bank guarantee as security along with post-dated cheques of all instalments for the financial year at the time of opting for the scheme.

"This would mean sales tax incidence to players in Rajasthan would be around 0.1 per cent compared to 1 per cent in the rest of the country. In the past, we have seen Jaipur being the number one entry port for bullion in the country. We may see this happening again," Mr Bhargav Vaidya, a bullion analyst, said.

The scheme is unlikely to affect bullion business in Mumbai compared to other Western India centres. "Gold import business in Delhi and Ahmedabad will be affected badly. Major imports will now be diverted to Jaipur," said Mr Suresh G. Hundia, President of the Bombay Bullion Association. Gold imports into southern States, however, will not see any major impact, sources said.

The major gold centres in the country are Delhi, Ahmedabad, Mumbai, Chennai and Kochi.

At present, sales tax rates on bullion in Maharashtra and other neighbouring States are 1 per cent. In January 2003, seven States, including Gujarat, Rajasthan, Delhi, Uttar Pradesh, Tamil Nadu and Maharashtra, decided to impose a uniform sales tax rate of 1 per cent on gold to stop the diversion of trade across States because of the lower tax imposed by several of them.

Major nominated banks are now considering shifting their import business to Jaipur Airport from other centres such as Ahmedabad and Delhi. These include ICICI, Nova Scotia, Indus Bank, PNB and Corporation bank, according to the sources.

Gold imports are expected to be negligible this month due to Union Budget 2004-05. Imports have been halted for some days. However, stock-on-hand with importing banks are expected to be lower, a leading dealer said.

In June 2004, imports into the country were about 20 tonnes. "At present, local demand for gold is extremely limited due to Adhik Mas (additional month in the Hindu calendar)," Mr Madhusudan Daga, a leading gold expert told Business Line.

Total imports in 2003 were around 471 tonnes compared with 410 tonnes in 2002, an increase of 14.8 per cent. Of this, imports by nominated banks and nominated agencies were 304 tonnes and 165 tonnes, respectively, as against 319 tonnes and 89 tonnes in 2002.

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