The GST Council may review the tax rate on gold under the new GST regime in its first quarterly meeting, with Kerala state and the Central Board of Excise and Customs keen on imposing a higher 5% levy on the precious metal, ET Now reported citing unidentified sources. However, Finance Minister Arun Jaitley has favoured the low tax rate of 3% on gold to prevent smuggling, ET Now report added.
Earlier this month, the GST Council fixed the rate of tax on gold at 3%, keeping it close to the current tax incidence of about 2% on the precious metals across most states in the country and bringing cheer to the industry wary of a rise in tax outgo. The rate of tax imposed on gold under GST is lower than the lowest slab of 5% under the new regime to be implemented from July 1. Notably, the traders’ lobby had been demanding to keep the levy on the precious metal at close to a concessional rate of 1%.
Experts had earlier expressed concerns that a higher tax rate on gold will only add to the already high proportion of cash transactions on the commodity, and will increase gold smuggling with most traders choosing to evade taxation altogether. Kerala finance minister Thomas Isaac had made a case for a 5% GST rate on gold earlier as well, saying that since it is a luxury item, there’s no reason for taxing it at a concessional rate.
The government is also considering convening a meeting of GST Council every quarter to review the tax rates on various items on the basis of loss of revenue to states due to migration to the new tax regime, ET Now report said, adding that the council will also try to identify the items under GST causing exceptional loss to the Centre.
India is set to implement GST from July 1, its most sweeping tax reform since independence, which seeks to unify the entire country into a single market with a single value-added tax levy on all the goods and services across states at the point of consumption, subsuming into itself multiple taxes that are levied at present.
The GST Council, tasked with tasked with framing rules for the implementation of GST, has finalised the rate of tax on over 1,200 items and most of the services, proposing four tax slabs at 5%, 12%, 18% and 28% under the new regime. The council has exempted essential or daily consumption items and services from tax levy, such as fresh meat, fish, chicken, eggs, milk, curd, natural honey, fresh fruits, vegetables, flour and bread, and healthcare and education services.