Patna, Feb. 8: Bihar has sought a higher goods and services tax (GST) on gold bullion and jewellery, which trade associations say is delaying a decision on the matter.
Bihar's consumption level for gold jewellery is low compared to other states. Kerala, which has the highest gold consumption level in India, too, seeks a higher GST.
The Centre has fixed a four-slab structure - 5%, 12%, 18% and 28% - for GST but said tax on bullion and jewellery would be different.
A finance official said: "The rate has to be such that we don't lose revenue. Even if there is a revenue neutrality (Centre compensating states for five years on any shortfall), what will happen after five years?"
Bihar's revenue from gold sale, bullion and jewellery, is around Rs 40 crore, said BJP's Sushil Modi, who was the state finance minister during the NDA rule.
The low revenue is despite volume of sales much higher, Modi said adding: "The Centre and states tax precious metals including gold at rates between 1 and 1.6 per cent resulting in lower revenue. The other reason is that jewellers tend to avoid issuing receipts to evade tax which comes in handy for buyers."
Bihar Chamber of Commerce and Industries president P.K. Agrawal said: "Whatever the rate is arrived under GST, we want it to be similar for all the goods irrespective of place. This is our stand from the beginning," Agrawal said.
However, Modi was not very optimistic when asked if higher GST on gold will increase revenue for the state.
"I don't think this will help get more revenue. Gold is not produced in Bihar. It is brought from other states and sold. None of the banks here sell gold as in Kerala," Modi said adding: "Under VAT, it was agreed that goods with higher values should have higher tax.
It is to be seen in that context only. Another factor is that, apart from desirability of a higher tax on jewellery, which is an item of consumption for the rich, it is also an item which is prone to tax evasion, being a high-value item. The incentive to not report the transactions will be higher if the tax rate on jewellery is very high."
A central government committee headed by chief economic adviser Arvind Subramanian last year had suggested taxing gold and other precious metals at rates ranging between 2 per cent and 6 per cent. This, the committee had argued, would protect the revenues of the states even if the standard rate of GST was pegged below 20 per cent.
Though in consultations earlier, some states had expressed concerns that a high rate of GST on gold was not "politically feasible", it was felt that a system in which the rate on gold was kept low and the standard GST rate was high, would result in poor people ending up subsidising the gold consumption of the rich.
