Home / News / India /  GoM veers around levying 3% GST on sale of old gold

A panel of state finance ministers on Friday veered around a proposal to levy 3 per cent GST on sale of old gold and jewellery to check tax evasion, Kerala Finance Minister Thomas Isaac said.

The Group of Ministers (GoM) also decided to implement e-way bill for transportation of gold within the states, but implementing it for inter-state movement was not considered feasible.

The panel also decided to make it mandatory for gold and jewellery shops to generate e-invoice for every purchase and sale transaction.

Bihar Deputy Chief Minister Sushil Modi said the GoM reached a consensus on letting states decide whether to have e-way bill for intra-state movement of gold.

"It was decided that if any state wants to implement e-way bill for gold, they can do so for intra- or within the state transportation," he told PTI.

Modi, who also holds the finance portfolio, said while Kerala and Karnataka wanted e-way bill for inter-state movement of goods, Gujarat and Bihar felt it was not practical and feasible.

The GoM, comprising finance ministers of Kerala, Bihar, Gujarat, Punjab, Karnataka and West Bengal, set up to examine feasibility of implementation of e-way bill for movement of gold and precious stones met via video conferencing.

Isaac said the GoM arrived at a consensus on bringing sale of old gold within the GST ambit under reverse charge mechanism (RCM).

"It was decided that sale of old gold will attract GST at 3 per cent under RCM. The officers' committee will now work on the modalities," Isaac told PTI.

Isaac said this would put a check on tax evasion as currently most of the smuggled gold is sold as old jewellery to evade GST.

Under RCM, the buyer would be liable to collect and deposit the GST with the government.

Isaac further said the GoM has decided to start e-invoicing for jewellery traders which will help track down the end-user of gold.

"The discussion was that the threshold for e-invoice should be at 5 crore," he said.

The GoM, set up by the GST Council in November 2019, was also tasked to suggest alternative ways and mechanism to control tax evasion on gold.

The final report of the GoM would be placed before the Council.

Under the goods and services tax regime, e-way bills are required for inter-state transportation of goods valued over 50,000. However, gold is exempted.

In the electronic way (e-way) bill system, businesses and transporters have to produce the e-way bill before a GST inspector bill, if asked.

AMRG & Associates Senior Partner Rajat Mohan said levying GST on reverse charge basis in case of procurements from non-registered persons would help arrest the rampant tax evasion happening in case of jewellery trade.

"This step would also help limit the circulation of smuggled gold in India as the tax arbitrage for the blackmarketeers would fall by 3 percent of gross value," Mohan added.

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