Diversion of bullion trade to select centres of the country could be a thing of the past with states deciding to impose a uniform sales tax rate of 1 per cent on gold from Friday.

These include major gold trading centres, like Gujarat, Rajasthan, Delhi, Haryana, Uttar Pradesh, Tamil Nadu and Maharashtra, which were hitherto levying sales tax below the 1 per cent floor rate.

The decision was reached in the meeting of the empowered committee of state finance ministers on January 29, officials involved in the exercise said.

The move to levy a uniform sales tax would also stop the current diversion of trade across states because of the lower tax imposed by several of them.

"Sales tax on bullion is set to be levied at the same rate of 1 per cent across the country, with all the eight major states levying a lower sales tax on gold now deciding to impose the 1 per cent tax from tomorrow," a government official said.

Other than these eight states, Goa, Madhya Pradesh and Rajasthan, who were also levying a lower tax on gold than the 1 per cent floor rate, have already started levying a 1 per cent tax now.

Rajasthan has issued a notification for raising the sales tax on bullion to 1 per cent, while Madhya Pradesh reverted to the 1 per cent tax on bullion from January 1 this year.

Bullion industry experts said the move to have a uniform rate across the country on gold would remove artificial distortion in demand and supply of gold in the country.

Most of the states neighbouring the ones levying a lower tax on bullion had repeatedly raised the issue of diversion of trade because of anomalies in sales tax structure before the Empowered Committee of state finance ministers.

For instance, taking advantage of the sales tax concession announced by the Rajasthan government, Jaipur had emerged as one of the biggest gold markets in India with business in excess of 200 kilograms being done there daily. The city alone accounted for 60-65 per cent of India's imports.

Gujarat, another major gold importing centre, had halved sales tax on gold and silver to 0.5 per cent in September last year, primarily to lure back bullion importers to the states, which had seen business divert to Rajasthan due to the low levy there.

Following the lowering of tax, Ahmedabad alone accounted for nearly 35 per cent of the country's total imports.

Gold demand in the country, the worlds largest consumer, is pegged at 855 tonne annually.

Official imports account for about 535 tonne. The rest of the supplies come from illegal channels and its huge household and religious institutional reserves estimated at 10,000 tonnes.