Domestic jewelers claim that the Value-added tax (VAT) which is supposed to be implemented from April 1 2006 in the state of Rajasthan will harm the gold industry as the revenue from this sector will drop by almost 60 percent.
Currently the traders are required to pay just one percent of sales tax but after the execution of VAT traders will have to pay 1 percent of added uniform tax as well.
Jaipur alone is responsible for Rs100,00-150,00 crore worth of gold sales each year.
Sources believe that the low tax in the state is the reason why both local and foreign consumers prefer to buy gold from Jaipur.
However, the VAT will bring Jaipur on par with the rest of the country and thus the buyers will have several options.
Thus, Rajasthan is most likely to lose major share of its market to other regions of the country.
Daily consumption of gold in the state is expected to be about 500 to 550 kilo gram gold but after the implementation of VAT this figure is expected to shrink around 100 to 125 kilo gram per day.