Kerala to revoke purchase tax on gold four years after finding ‘technical error’

Four years after introducing purchase tax on gold with an aim to substantially increase the tax revenue, the state governmnet is now mulling a rollback. Ever since the introduction of the new tax, the state government has been reluctant to impose it, registering a huge deficit in the tax collection.

State Finance Minister Thomas Isaac said that the government was open for a discussion on revoking the 5% purchase tax on purchase of old gold ornaments by gold merchants. The Assembly subcommittee on Finance will consider the demand by the merchants, he said.

The 5% purchase tax on old gold ornaments sold to jewelers in the state was imposed with a retrospective effect in 2013. When the gold merchants raised a protest, the previous UDF government decided not to collect the tax.  KM Mani, who was the then Finance Minister, had recently admitted that the tax imposition was a 'technical error.' Legislators, cutting across party lines, demanded scrapping the tax. They pointed out that the imposition of compounding tax together with purchase tax on gold merchants was unnecessary and unjustified.

The controversial tax is likely to be revoked with the passage of the State Budget   next month. But it is likely to land the government in further troubles as a recent CAG report calculated  the 'short-levy' of tax on gold merchants including the purchase tax, to the tune of over Rs.2,500 crores. The Commercial Taxes Department had issued notices to gold merchants to remit the tax, after the CAG report.

Now the question is whether the government would revoke the purchase tax with retrospective effect.

• Purchase tax on gold
• Kerala budget 2017
• Gold merchants