With the government's decision to impose 2 percent luxury tax on gold and jewelery and 13 percent value added tax (VAT) on precious stones including diamonds, the businessmen are protesting, the government is also on its own stand.

After the government announced that the tax will be implemented from July 1, the businessmen have started closing their shops saying that they cannot implement it. They wrote a letter to the Internal Revenue Department on June 32 and stated that the government's decision cannot be implemented. 

Under the leadership of the Ministry of Finance, a working group has been formed to implement the 6-point agreement reached with the Nepal Gold and Silver Traders Federation, the Nepal Gold and Silver Gems and Jewelery Federation and the gold and silver traders and Kaligarh Sangharsh Committee. It cannot be implemented until the conclusion is reached,'' said in the letter sent to the department on June 32 by Kisan Sunar, president of the Nepal Gold and Silver Gems and Jewelery Federation, and Diyesharatna Shakya, the acting president of the Nepal Gold and Silver Traders Federation. 

The department and its subordinate offices have been asking for the implementation of the tax bill that should be issued by the person dealing in gold jewelry according to Section 17 of the Economic Act-2082. After the office sent the letter, they started closing the shop. 

The main point of the 6-point agreement is about luxury tax and VAT. It cannot be implemented until it is decided. There is also a demand that some relief should be given in case of importing gold from abroad. When Indians come to Nepal to get married, they can bring as much gold as they want, but the Nepalese do not get it," said Vipin Ramudamu, chairman of the Sangharsh Samiti, "six points have been agreed upon to resolve all these issues." 

Ramudamu said that jewelery shops in Chitwan, Makwanpur, Kaski, Parbat, Bara, Parsa and other districts have been closed after the government pressured them to cut bills from the new system. The more times gold and jewelery are sold, the more tax is levied. Ramudamu said, "We have asked to make it clear whether the tax will be charged when buying from the bank or from the industry or from the big shops." He says that if the government adds 2 percent luxury tax, the consumer price will increase by 12 to 15 thousand per tola. 

With the decision to impose tax, the businessmen have been in a phased protest for one and a half months. After the budget speech, they protested and formed a struggle committee. They have been putting pressure on various political parties and private sector umbrella organizations to address their demands. 

But consumer rights activists say that this will not cause any loss to businessmen. Madhav Timalsina, President of Consumer Rights Research Forum said that since gold is a luxury item, tax implementation is necessary.

The government will give discounts and concessions on food items. Gold is a luxury item. It is better to impose tax on such items," he said. "It is not an essential item, if the price increases, there will be no impact on the businessmen." "When the price of gold reached about two lakh per tola, no businessman raised his voice in favor of consumers. Now, when it comes to taxes, consumer prices will increase, but the businessmen's movement means that there is some quality inside,' said Timalsina. 

Acting President of Nepal Gold and Silver Traders Federation Shakya said that it is not possible to implement VAT and luxury tax immediately as the task force will clarify the level. He said that when the government started implementing 2 percent tax, the businessmen were forced to close their shops in protest.

``At present, the bank will charge 2 percent, dealer (on the recommendation of the district association) 2 percent, retail shop 2 percent, consumer price 2 percent, the consumer price will increase a lot. The customer is more likely not to buy. Jewelry is not only for wearing, but also for investment," Shakya said. "If the general public does not buy jewelry, the business will be closed." So far, 23,650 jewelry dealers have been registered, Shakya said.

More than a thousand jewelers buy gold directly from the bank on the recommendation of the association. With this system, 1,000 jewelry shops will pay 4,000 per tola cheaper than other (small) ones. Big shops are cheap and small shops are expensive, so there is variety in the prices,' Shakya said. Big shops would run, small ones would be closed. A task force has been formed to settle this.

Deputy Director General of Internal Revenue Department Tirtharaj Chiluwal said that the policy implemented by the government will be implemented. "Our aim is to reduce the illegal trading of gold and bring it into the system in a transparent manner, if the businessmen are really on the side of the consumers, they should reduce the wages and taxes, maintain the purity of gold," he said.  

'50 percent illegal transactions suspected in jewelry market'  

The Internal Revenue Department suspects that about 50 percent of transactions in the jewelry market are illegal. After the Office of the Auditor General raised questions about the purchase of jewelry from natural persons (end consumers) and the legal sources and expenses of the purchase, the department also suspected illegal transactions. 

'In 27 taxpayers dealing in precious metals under the Internal Revenue Office, New Road, they purchased jewelery worth 23.22 billion 98 lakh rupees in 2079/80 and 2078/79. 3 billion 65 million (15.52 percent) have been purchased from other parties," said the 62nd annual report of the Auditor General, "18 billion 156 million (78.16 percent) have been purchased from natural persons. In case of purchase from natural person, the payment did not appear to be through the banking system. The legal source and expenses of this kind of purchase should be investigated and tax determined.'