Indian Government Rolls Back Gold Tax
In yet another comedown and bowing to the needs of the bullion industry, the Indian government has decided to withdraw the levy of 1% excise duty that it had imposed in the Budget. Gold is set to become cheaper for consumers in India, with traders expecting a revival in demand in the following crucial months.
“Gold will immediately become cheaper by about $5.63 (Rs 300) per 10 gram. The roll back has come at the right time as the next two months are very crucial for gold jewellers. June and July are important months for weddings here and also for rural India as the monsoon rolls in across the country,” said Mangal Shah, bullion trader.
Giving in to the demands from various sections, both “within and outside the House”, Finance Minister Pranab Mukherjee announced in Parliament that the government had decided to withdraw the 1% excise duty on all precious metal jewellery, branded or unbranded.
“A proposal that has attracted public attention is the implementation of central excise duty on the unbranded precious metal jewellery at the rate of 1%. I would like to reiterate that this (levy) was well intended and introduced not so much for raising revenues but for rationalisation and movement towards the goods and services (GST) tax,” Mukherjee said in the Lok Sabha while initiating a debate on the Finance Bill, 2012-13.
“But the outpouring of sentiments inside and outside the house has indicated that we are not ready for it and the government has decide to withdraw the levy on the branded and unbranded jewellery as from March 17, 2012,” he added.
Analysts had earlier debated that the move to impose excise duty would help the government mop up about $112 million (Rs 6 billion) in additional revenue and help contain the Indian government’s burgeoning current account deficit
The government has also decided to raise the threshold limit for cash purchases of jewellery to $9399 (Rs 500,000) from $3759 (Rs 200,000). Now, consumers can buy gold jewellery with cash up to Rs 500,000 without citing the income tax related PAN number
On increasing the threshold limit, Mukherjee said: `”To cut the flow of unaccounted money in the jewellery trade, the Finance Bill had proposed the collection of tax at source by the seller at the rate of 1% from the sale amount of 1% from the buyer for all cash transaction exceeding Rs 200,000. Responding to the representation made by the industry that this will cause undue hardship, I propose to raise the tax deducted from source to Rs 500,000.”
However, the minister added that the threshold limit for cash purchase on bullion will be retained at Rs 200,000. Bullion will not include any coin or other article weighing 10 gram or less, he added.
Following the imposition of the tax in the Budget, several thousand jewellers across India had gone on a 21-day strike. Assurances that Mukherjee would look into the matter followed by a meeting with Congress president Sonia Gandhi, and the strike was brought to a close.