Kerala: Rs 1,000 crore expected from gold sector with strict rules

Thiruvananthapuram: Once the GST is in place the state government will lose even the little manoeuvring space it had to extract some extra revenue from gold sales. Nonetheless, the finance department has decided to tighten things up in the only area where it will have a say: tax administration. The Department expects to mop up Rs 700- Rs 1000 crore annually by merely applying the rules strictly.

Certain administrative lapses, which are causing huge tax leakages, have come to the notice of the Department. The most glaring of these are: non-forfeiture of illegal collection by jewellery brands, claiming excess rebate for old gold, and lack of coordination among departments. (The usual political tactic of reducing tax rate with retrospective effect in budgets, too, has been identified as a major haemorrhage point. But the state’s power to tweak taxes to favour certain players will be taken away by GST.)

Under Kerala Value Added Tax (KVAT) Act dealers who have opted for compounding tax alone can collect tax. (The tax permitted to be collected on the sale of goods is 1.03 to 1.5 percent of the compounded tax paid during previous year.) However, dealers who are compounding for the first time are not entitled to collect tax. “The Department has found that hundreds of dealers have collected compounded tax during 2014-15 even though they were not entitled to do so,” a top Department source said. “Illegal collection of tax needs to be forfeited as per Section 72 of KVAT Act,” the official said. Nearly Rs 300 crore remain uncollected.

The Department has also found that dealers claimed excess special rebate in respect of old gold purchased from unregistered dealers. “These dealers converted this gold and sold it as bullion. The state loses Rs 300-400 crore as a result of this excess rebate claimed by dealers,” the official said.

The need for cross verification of data between various implementing and taxation authorities to check evasion cannot be over-emphasised. The Department, in a self-confession of sorts, has noted in an inter-office memo that it was not collecting details from any other central or state Government agencies and compiling a data bank. For instance, the memo noted that dealers could easily suppress imports because the Department had not secured the data with the Customs.