The GST Council has 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 thus 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.
“There was extensive debate on gold, and between 2% and 5%, there was almost a vertical division. A consensus has been reached at 3%,” Finance Minister Arun Jaitley said yesterday. 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.
Here is what tax experts have to say
Suresh Nair, Tax Partner, EY: Inspite of a near vertical division, the GST Council manages a consensus on rate of tax on gold at 3%. This adds on to another new tax rate under GST regime. It would be interesting to watch the trade community reaction in the transition phase given that the GST rate in most states could be higher than the overall current effective tax rate on gold.
MS Mani, Senior Director, Deloitte Haskins & Sells LLP: This may open the door for other products to request special rates for their products or their coverage in the 3% slab.