MUMBAI (Scrap Monster) : The local unit of the All India Gem & Jewellery Trade Federation (GJF) has urged the Indian government to ease the Value Added Tax (VAT) on gold sales in the southernmost state of the country. The higher VAT charges have led to a significant fall in gold jewellery sales.

The VAT charges on gold sales in the state of Kerala are calculated at 5% of sales, whereas it is 1% elsewhere in the country. This essentially means that a customer who buys a sovereign of gold is forced to pay Rs1,100 in the state whereas he needs to pay only Rs.200 in other states. This is on the assumption that a sovereign of gold costs Rs 20,000 as per prevailing market rates.

The disparity in applicable VAT rates in the state over rest of the country has pulled down the gold jewellery sales in the region. According to recent data, the gold jewellery sales in the state have dropped by a whopping 40% during the month of June.

Reports say that customers from the state prefer to buy gold from neighboring states where they need to pay only less tax. The Trade Federation indicates that such a situation would hamper the gold jewellery trade in the state. This in turn would axe thousands of jobs and also lead to significant cuts in state revenues.

The excess VAT rates tend to create additional burden on jewellers too, since they have to shell out 25% of yearly VAT in advance to the government.

The Federation expects the government to announce a decision in their favor during their meeting with the government officials scheduled for tomorrow. In a plea to the Indian government, Mr. M.P Ahmed-Director, GJF called for uniformity of VAT rates across the country and further cut in tax rates.

Author: Paul Ploumis