The GST Council today fixed the rate of tax on gold at 3%, Finance Minister Arun Jaitley said on Saturday. The rate of tax is lower than the lowest slab of 5% under the new GST regime to be implemented from July 1, and is closer to the current tax incidence of about 2%. “There was extensive debate on gold, and between 2% and 5%, there was almost a vertical division. A consensus has been reached at 3%,” Arun Jaiteley said.
Notably, the traders’ lobby had been demanding to keep the levy on the precious metal at close to a concessional rate of 1%. Market experts had 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.
Gold price staged a smart recovery on Saturday at the bullion market, surging Rs 300 to Rs 29,550 per 10 grams largely on firm global cues and pick up in buying by local jewelers. Yesterday, gold price fell in the local markets with the dealers reportedly selling the precious metal at a discount to the official prices, over concerns of the higher tax levy than the current effective incidence of about 2%.
The GST council also finalised all the pending rules for the most sweeping tax reform India has ever seen since independence, which is due to be implemented in less than a month from now. The rules finalised included those on transition and returns, raising the input tax credit limit on the existing stock as on July 1 from the earlier proposed 40%.
Earlier last month, the GST Council, tasked with tasked with framing rules for implementation of GST, finalised the rate of tax on over 1,200 items and most of the services, while deferring decision on six items including gold to today’s meeting.
The council has proposed four tax slabs at 5%, 12%, 18% and 28% under GST, while exempting 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. Other than this, it levied cess over and above the 28% tax on certain luxury goods and sin goods. The GST Council kept 81% of the items in the first three tax brackets, ie, up to 18%. The 12% and 18% tax bracket together account for two-thirds of all items.
GST seeks to unify the entire country into a single market with only one value-added tax levy on all the goods and services across states at the point of consumption, subsuming up to 16 different taxes and levies that are imposed at present. This is expected to make the movement goods across the state borders smoother, faster and easier, though some experts have raised concerns over the complications that could arise out of a multiple tax-slab structure.