Gold traders are divided over the desired rate of taxation under the goods and services tax (GST), which is set to be implemented from July 1.
While the All India Gems & Jewellery Trade Federation (GJF), which comprises manufacturers and retailers of gold jewellery, wants the government to keep the GST at 1.25%, the India Bullion & Jewellers Association (IBJA) has said that the government should bring down the import duty on gold to 6% from 10% to reduce smuggling, and fix the GST Rate at 6%.
Representatives of GJF have met the finance ministers of 15 states and are in the process of meeting the finance ministers of another five states – Uttar Pradesh, Uttarakhand, Goa, Manipur and Punjab – which held elections recently.
“We also intend to meet the finance minister of Tamil Nadu to discuss the GST issue. Higher GST will result in drop in tax compliance and revenue, and will also encourage smuggling. Therefore, GJF has proposed that the GST rate for the gems and jewellery sector should be kept at 1.25% if the government expects the industry to be compliant and get organised. The procedure of GST compliance should also be easier,” said GJF chairman Nitin Khandelwal.
At present, gold attracts import duty of 10%, 1% value added tax (except in Kerala, where the VAT is 5%) and 1% excise duty.
“This means that the total duty on gold stands at 12%. IBJA has asked the government to reduce the import duty to 6% from 10% and fix the GST rate at 6%. Unless the import duty is reduced on gold, smuggling will continue,” said IBJA national secretary Surendra Mehta.