Two years ago, the Indian government implemented a tariff on gold importation in an attempt to slow down the massive buying of the precious metal by their people and institutions. And the blowback from this was a large increase in smuggling since the buying of gold is a deep cultural practice for the Indian people going back thousands of years.
Then the government decided to create a scheme in which individuals and even religious orders should 'lend' their gold to the banking system in exchange for a modicum return of interest. But the result of this has been negligible as nary a ton of gold has been offered to the banks in exchange for yield.
Now on Sept. 16, the Indian government is proposing a new tax increase on gold and other precious metals in what they call a way to keep from having raise the tax rate on other discretionary and necessary consumer goods.
The Indian government plans a proposal that includes a major increase in the tax on gold and other precious metals so as to give the GST (Goods and Services Tax) Council leeway to keep the proposed nationwide tax below 20%, reports The Hindu as quoted by Gem Konnect.
The proposal is based on the recommendations of last year’s panel headed by Chief Economic Advisor Arvind Subramanian. The panel had suggested taxing gold and other precious metals at rates ranging between 2%-6%.
Precious metals are currently taxed at between 1%-1.6%. Meanwhile, about 70% of goods and services get taxed at an average rate of 27% by state governments. To protect their revenues, states have sought that the proposed standard GST rate be fixed at 20%. - Israeli Diamond Industry