Gold business in Kerala is on the warpath over the ruling LDF government’s drive to collect 5% purchase tax, with retrospective effect from 2013-2014. The purchase tax on gold was introduced by the previous UDF government. The protest of Kerala Jewellers’ Association (KJA), led by Kalyan Jewellers’ founder TS Kalyanaraman, Bhima Jewellers’ chairman B Govindan and Malabar Gold’s chairman M P Ahammed, got underway with a rally in the state capital on Monday. The state taxes department has served notices on the jewellers to the tune of `2,600 crore.
“The previous government, which introduced the tax, had not levied it since there was no consensus on finalising a method to collect the tax,” said a KJA spokesperson. They argue that the previous government had “inadvertently” included this tax in the financial Bills presented by the UDF’s finance minister K M Mani. According to Ahammed, the industry has filed several representations before the state government, with little result. The system of compounding of sales tax and the purchase tax, as is slapped in the state, is specific to Kerala.
The purchase of gold, silver and platinum in any form attracts a 5% VAT (value-added tax) in Kerala. Exchange of old jewellery too is treated as sale under the state’s VAT policy. Since customers or individuals are not registered sellers, the onus is on the jewellery firm to collect it from customers and pay it to the government. Kerala’s sales tax revenue to the state from gold sales is about `480 crore per year, compared to about `100 crore each in Karnataka and Tamil Nadu.
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The state’s gold consumption is one of the highest in the country. According to World Gold Council, India accounts for approximately 30% of global gold demand, of which Kerala is a prime contributor. Three loan companies in Kerala (Muthoot Finance, Manappuram Finance and Muthoot Fincorp) together hold 47% of India’s gold in their vaults, at a whopping 262.78 tonnes.