THIRUVANANTHAPURAM: Tightening the noose around tax-evading jewellery shops, the state government has announced stringent steps including broader and more frequent inspections and cancellation of GST registrations of those who dodge payments. The steps, however, have not gone down well with the jewellers, who said these are as good as “declaring war” against the jewellery merchants in the state.
The new steps, taken at a high-level meeting headed by Chief Minister Pinarayi Vijayan on Tuesday, also include tightening the sales tax intelligence network. The meeting also explored the possibility of making CCTV footage of showrooms of large jewellers available at the GST office and police stations across Kerala.
The chief minister also directed the authorities to carry out strict inspections in areas where tax evasion is rampant. GST registration of violators will be cancelled. The meeting also decided to provide adequate incentives to officials who discharge their duties diligently in tax collection. All Kerala Gold and Silver Merchants Association (AKGSMA) said there is no point in the argument that the tax from gold sales is not up to the expectation.
‘Only those who evade taxes need to be worried’
When compared with tax collection during the VAT period, the tax collection under the GST regime has increased. The 3% tax levied on gold is equally shared between Centre and state governments (1.5% central GST and 1.5% state GST). The bullion used for gold manufacturing is mainly sourced from other states where the tax is charged for every purchase, it said.
Around 15,000 gold traders, manufacturing units and wholesale traders, are engaged in the sector of which around 7,000 traders who have an annual sale of over `40 lakh have GST registration. The new reform will lead to ‘police raj’ in jewellery shops and the decision to link the CCTV visuals with local police stations is an infringement on the freedom of gold traders, it said.
Commenting on the protest of gold traders in the reforms, the CM said “Only those who evade taxes need to be worried about the suggestions. There are traders who pay tax regularly. This is aimed at bringing those who regularly evade the tax under the tax net. There are even instances of some who supply the ornaments to customers for wedding. These are not sales from shops. They have to be dealt with seriously,” he said.
Tax evasion among the jewellers has been a big headache for the state government. T M Thomas Isaac, when he was the finance minister in the previous LDF regime, had pointed out that the state was getting only less than `200 crore as tax from the gold sales compared to more than `750 crore it fetched under the erstwhile VAT regime.
He pointed out that despite the lower rate of 1.25% under VAT, the state government collected about `630 crore in 2016-17, while under GST from 2017-18 where the rate is 3%, the amount has been falling well short of `200 crore.
Malayalis have a big obsession for the yellow metal, though it’s not reflected in tax collections. As per the National Sample Survey Office data, the state’s per capita expenditure on gold ornaments is `208.55 per month in rural and `189.95 per month in urban areas. This is far ahead compared to the second top gold buyer, Goa (`34.07 per month per person in rural) and Tamil Nadu (`44.86 per month per person in urban).