Thiruvananthapuram: Finance minister Dr T M Thomas Isaac said that gold should be taxed at 5 percent under the GST regime. Right now, gold, silver and precious metals face no central excise and most States tax these commodities at the non-standard rate of one per cent. Kerala is the only exception; here dual taxation is in vogue for gold. For those who have opted for compounding, nearly 70 percent of gold traders in the state come under this segment, the effective tax works out to just over one percent. The traders who have turned their backs on compounding are charged five percent, the highest in the country.
Isaac wants the country to adopt this rate for gold. “I don’t think gold is a necessity, it's a luxury,” Isaac said at a session on ‘Goods and Service Tax and its Impact on Business’, which was organised by Confederation of Indian Industry here on Friday. Statistics back Isaac’s ‘luxury’ argument. The top two deciles, the country's topmost elite, account for over 80 percent of total gold consumption. The lowest two deciles account for not even one percent of gold consumption. This means, the subsidy gold enjoys, granted mainly to prevent smuggling, is virtually appropriated by the rich.
Isaac puts forward a more compelling argument, the one championed by the centre’s chief economic advisor, Dr Arvind Subramanian. “If the rate on gold remains low, the standard rate on all other commodities will have to be raised,” Isaac said. Dr Subramanian had earlier stated that if gold is taxed at 4 percent the standard rate will be 17.3 percent. In contrast, if gold is taxed at 6 per cent, the standard rate can come down to as much as 16.9 per cent.
Isaac also brushed aside the argument that increasing the tax on gold would discourage savings as the metal was widely considered the most dependable fallback option. “If you are looking at gold as a savings option, then the tax rate should be considered a neutral figure. You might have to pay higher to purchase gold but you will also get a higher price when you sell it,” the FM said.
