Hyderabad: Most jewellers and gold traders in Telangana and Andhra Pradesh, hide a lot of transactions to avoid multiple taxes that run into several crores.

The state Commercial Tax department has cautioned traders to comply with rules to avoid random raids and checks.

Gold traders have to pay a 1 per cent value added tax (VAT) to the Commercial Tax department for sales of solid gold or jewellery form.

Officials say that while the 1 per cent tax on the total value of the commodity is not a big deal for traders, it has a cascading effect on other taxes.

“One per cent of VAT on bullion or jewellery is not an issue for the dealers, but the slew of other taxes — sales tax, income tax, and import duty — that needs to be paid once VAT is paid, is a headache; also declaration of the source of the gold purchased,” said a higher official of the Telangana State Com-mercial Tax Depart-ment.

He added, “If VAT is paid to the state Commercial Tax department, then mentioning the source from where the gold has been purchased is mandatory. The gold purchased attracts excise duty and import duty. The sales declaration at the store attracts income tax. Thus, avoiding VAT by not issuing bills would help them in evading all the applicable taxes.”

However, Commercial Tax officials have said that they will now crack down on tax evasions by bullion traders in the state. An official with the Enforcement Wing said, “Usually tax evasions like these have always attracted huge penalties, up to 20 per cent of the total gold value, besides sales tax and VAT. The gold will not be released until all the penalties are paid. However, before undertaking such raids and imposing huge penalties, we have cautioned the traders by holding meetings with them.”

Black money converted into gold

Smuggling of gold and conversion of black money into gold has increased recently years, due to high import duty.

According to the World Gold Council, nearly 200 tonnes of gold entered India in 2014 illegally. The All India Gem & Jewellery Trade Federation is thus demanding a cut in the import duty to curb smuggling. Gold import attracts 10 per cent duty and despite several representations by the industry, Finance Minister Arun Jaitley did not reduce it in the recent budget, raising fears that unofficial gold supply will increase in the market.

The Federation had asked for the duty to be slashed to 2 per cent. The Managing director of a reputed jewellery group said, “Though the Finance minister has announced a series of measures to curb black money in India, he has ignored one of the biggest issues of smuggling of gold into the country. The impact of this ‘unofficial’ supply of gold is valued at about $10 billion, leading to a loss in revenue of over $1 billion on account of customs duty.”