Gold jewelry sits in a display case at a Dwarkadas Chandumal Jewellers store in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Niti Aayog Suggests Slashing Import Duty, GST On Gold

The government think tank Niti Aayog has suggested that the government bring down import duty on gold from the existing level of 10 percent and also slash the Goods and Service Tax rate on the precious metal from the current 3 percent.

It has also recommended the government to review and revamp the gold monetisation scheme and the sovereign gold bond scheme and introduce new gold savings account in banks, besides setting up a gold board and bullion exchanges across the country to have greater financialisation of the yellow metal.

In its latest report, the committee headed by Niti Aayog Principal Adviser Ratan P Watal said “reduction in the customs duty in the past has been argued to support tax compliance coupled with a significant reduction in the quantum of gold smuggled into India.”

“In this context, it is important to reduce the basic customs duty on gold to as low as possible to create a tax compliant system within the sector,” Watal said.

Also read: Safe Havens, U.S. Rates and Physical Demand: Gold Myths Busted

The committee also suggested exemption of 3 percent Integrated Goods and Service Tax to be paid by exporter online with custom duty with a provision of bank guarantee. This exemption, it said, should also be extended to the supply of gold by foreign buyer.

Besides, the committee said there should be reduction of GST on gold from 3 percent to appropriate levels.

The think tank said that the threshold for exemption under GST, which at present is Rs 20 lakh, should be revised on the basis of value-addition, which can be determined by using average ratio of value added to value of sales for the sector concerned.

Also, the GST rate for repair service of jewellery should be reduced from 18 percent to 3 percent.

The committee has recommended scrapping of commodity transaction tax on gold derivatives and provision for capital gains tax exemption for gold related financial instruments.

The committee said the finance ministry must review and revamp the the gold monetisation scheme, with time-bound targets that may be set through a comprehensive gold policy.

Also read: Rising Gold Prices Keep India’s Jewellery Buyers At Bay

It said that the banks should be encouraged to set up more branches to accept gold deposits under the Gold Monetisation Scheme, allow deposits as low as one gram, and multiples thereof, and exempt the transfer of gold collected under the scheme from the purview of the GST.

The committee, which was constituted to recommend measures to transform India’s gold market, suggested the introduction of a financial product for banks—‘Gold Savings Account’—that will accept rupees and credit grams of gold, with passbook facility.

It also proposed to set up ‘The Gold Board of India’ and bullion exchanges under the Ministry of Finance. This would be positioned as a single-window, one-stop interface that will be assigned with the responsibility to formulate policies. Gold as a foreign exchange asset would continue to be professionally managed by the regulator RBI, it said.