Thiruvananthapuram: A "mysterious omission" in Finance Act 2014 has put not just gold traders in the state, but also finance minister Dr T.M. Thomas Isaac in a fix. The omission of the word ‘purchase’, which was spotted only this fiscal by the Accountant-General, has led to the Commercial Sales Tax Department imposing a ‘purchase tax’, in addition to the sales/compounding tax, with retrospective effect on gold and silver traders. The total ‘purchase tax’ arrears (5 per cent purchase tax and 5 per cent penalty) from 2013-14 has accumulated to Rs 2,500 crore; liability range from Rs 15,000 to Rs 150 crore for each trader.
Till 2013, Finance Acts referred to ‘levy of tax on sale or purchase of goods’. The 2014 Act speaks just about levy of tax on ‘sale’ of goods, prompting the AG to see in this omission a legal scope to extract a tax on purchase. Traders, naturally, have resisted payment, and have shot off a missive to the finance minister to either restore the original wordings or prevent tax officials from levying the tax.
But the finance minister is non-committal, though he knows such a tax is against the spirit of Value-Added Tax.
“Any such move will be construed as a favour to the gold merchants’ lobby and could prove politically embarrassing,” a top finance department source said. So Dr Isaac’s stated position is that he will go ahead with the collection of arrears.
Dr Isaac will abolish the tax provided there is a political consensus on the issue. “The minister will want the UDF, which had made the omission, to first admit that it was a mistake,” a top finance department source said. The issue is expected to be raised as a submission in the Assembly on October 24 or 25.
“The finance minister will argue that the imposition was not of his making and would demand an explanation from the UDF for making such a subtle change in the literature of Finance Act,” the source said. “The minister will ask the UDF whether it was a mistake or another attempt to bully traders into paying bribes,” the source added.
