New Delhi - Government think tank Niti Aayog has suggested the government to bring down import duty on gold from the existing level of 10% and also slash the GST rate on the precious metal from the current 3%.
It has also recommended the government to review and revamp the gold monetisation scheme and the sovereign gold bond scheme and introduce new gold savings account in banks besides setting up of a gold board and bullion exchanges across the country to have greater financialisation of the yellow metal.
In its latest report, the committee headed by Niti Aayog Principal Adviser Ratan P Watal said: "A reduction in the customs duty in the past in India has been argued to support tax compliance coupled with a significant reduction in the quantum of gold smuggled into India.
"In this context, to create a tax compliant system within the sector, it is important to reduce the basic customs duty on gold to as low as possible."
The committee also suggested exemption of 3% Integrated Goods and Service Tax (IGST) to be paid by exporter on line with custom duty with a provision of bank guarantee.
This IGST exemption should also be extended to the supply of gold by foreign buyer, it added.
Besides, the committee said there should be reduction of GST on gold from 3 percent to appropriate levels. Job workers receiving gold from other states may be considered for exemption from obtaining GST registration.
Further, it said the threshold for exemption under GST, which at present is Rs 20 lakh, should be revised on the basis of value-added, which can be determined by using average ratio of value added to value of sales for the sector concerned.
Also, the GST rate for repair service of jewellery should be reduced from 18% to 3%.
The committee has recommended scrapping of commodity transaction tax (CTT) on gold derivatives and provision for capital gains tax exemption for gold related financial instruments.
With regard to gold monetisation scheme (GMS), the committee said the finance ministry must review and revamp the scheme, with time-bound targets that may be set through a comprehensive gold policy.
It also said that banks should be encouraged to set up more branches to accept gold deposits under the GMS, allow deposits as low as one gram, and multiples thereof, and exempt the transfer of gold collected under the GMS from the purview of the GST.
The committee, which was constituted to recommend measures to transform India's gold market, suggested introduction of a new financial product for banks 'Gold Savings Account', that will accept rupee and credit grams of gold, with passbook facility.
It also proposed to set up a new body 'The Gold Board of India' and bullion exchanges under the Ministry of Finance. This would be positioned as a single window one stop interface - assigned the responsibility to formulate policies.
Gold as a foreign exchange asset would continue to be professionally managed by the regulator RBI, it added.
The committee said the report provides a robust foundation for realising the policy intent stated in the Union Budget 2018-19 of developing a comprehensive Gold Policy to develop gold as an asset class and outlines the way forward for realising the transformational potential of India's gold market.