New Delhi: The Goods and Services Tax (GST) rate of 3% on gold is low and needs to be increased as it is consumed by the “very rich”, feels chief economic advisor Arvind Subramanian, the author of the Economic Survey.
According to the Economic Survey Volume II 2016-17, tabled in Parliament on Friday, “The tax on gold and jewellery products – items that are disproportionately consumed by the very rich – at 3% is still low.”
Reacting sharply, Mr. Nitin Khandelwal, Chairman, All Indian Gems & Jewellery Trade Federation (GJF) says, “We are surprised to see reports of a very contrary, and shocking view by the Honourable CEA, author of The Economic Survey on GST rates for the gems and jewellery sector. It’s NOT difficult to fathom the seriousness of learned views of various experts, tax departments, and senior members of the country over decades, that high rates of tax on any price sensitive sector will be detrimental to compliance. Further, the principles of GST is to keep rates similar, close to earlier existing VAT rates. GJF has time and again supported and welcomed the Government’s decision of imposing 3℅ GST on gold and has transitioned smoothly into a compliant GST era from July onwards. Gold has a 5,000 year old legacy in India and is not luxury but essential to socio-economic framework of our country.”
“Gold is used by rich and poor people for obvious reasons, and around 60 to 65% of business is generated from rural segment. The handcrafted jewellery business generates the second highest employment in India. Even though GJF demanded 1.25℅ GST on gold in line with the low tax rates in majority of States, the trade was convinced to accept 3℅ GST and to express solidarity with the Government that was introducing biggest tax reform since Independence. Low tax rates on gold will lead to greater transparency and compliance amongst jewellers, and Government can get collect more tax. Honourable CEA, author of The Economic Survey is sending a contradictory, conflicting message within 45 days of the beginning of the GST era will create confusion and a contradiction to Honourable FM Arun Jaitley and all State FM’s research. All policy makers should continue to support earlier decisions made by Government wrt GST on gold arrived through consensus and help industry stakeholders to mature, get more organised and successfully transition into GST regime. So the observations by the CEA are not aligned to the macro Government policy and broad principles of thinking,” he added.
