The GST Council’s meeting on February 18 at Udaipur will decide tax rate on gold. Gold is at present attracting a sales tax of 1% and an excise duty rate of 1%.
Reports indicate that states are arguing for a rate of 4%. At this rate, the centre and state may divide the tax revenues equally among them. Effectively, the proposed rate doubles the existing cumulative rate of 2%.
Besides the excise duty and VAT (state sales tax), gold is having an import duty of 10%.
A high rate may encourage smuggling and tax evasion. indirectly, such a rate will bring frictions between the dealers and tax officials.
The 4% tax rate for gold is a rate outside the prescribed GST rates of 5%, 12%, 18% and 28%. Few commodities may attract such specific rates because of their relative uniqueness in terms of trade and consumption.
