In the recent state budget for the current fiscal, the Maharashtra government proposed to reduce sales tax on the precious metal to 1.5 per cent from the earlier two per cent levels. The decision came in the wake of long-standing demand from bullion traders.

According to leading traders, following the decision, price disparity between the two states will narrow as the new sales tax will be at par with Gujarat. The only difference will be the one per cent levy by way of octroi. Mumbai, which accounts for more than 50 per cent of inter-state export of gold, will be able to get back some of the market share it had lost due to the tax differential between the two states. Importers of Gujarat, who get their supplies via Ahmedabad will now divert the air cargo to Mumbai, to take advantage of tax benefits. Some othercentres like Surat and Navasari are also likely to lose their gold business, it is believed.

According to Girish Choksi, president Ahmedabad Choksi Mahajan, the impact of the decision will be not as major as was expected earlier. The sales tax disparity has been removed, but octroi and turnover tax is still higher at 1.65 per cent, earlier it was at two per cent levels, hence effective disparity has been reduced by only 35 per cent. ``However if Maharashtra abolishes the octroi in Mumbai, it will pose a threat to the Gujarat's bullion trade, especially gold. It is difficult to assess the impact of the decision at the fag end of March. The traders are busy settling accounts ahead of current financial year ending March 31. Hence volumes are very low,'' he added.

The local courier firms, commonly called `angadia' of the state are also likely to suffer due to the reduction in Maharashtra's sales tax. As most deals are on cash basis, these courier firms play a key role in the business. The angadias delivergold biscuits to dealers and jewelers of Mumbai.