Gold to attract 3 percent GST, Footwears costing below Rs 500 to be taxed at 5 per cent

Gold will be taxed at 3 per cent in the goods and services tax (GST) regime which will kick in from July 1.

In its 15th meeting, the all-powerful GST Council on Saturday decided to tax footwear below Rs 500 at 5 per cent while placing the rest under 18 per cent slab. Currently, footwears priced between Rs 500-1,000 are levied an excise duty of 6 per cent besides state VATs.

The readymade garments will attract a levy of 12 per cent under the new indirect tax regime. Both footwears and garments are expected to be cheaper in the GST regime.

Tendu leaves and bidis would be taxed at the rate of 18 per cent and 28 per cent respectively, Union finance minister and GST Council chairman Arun Jaitley said after the meeting here in the capital. He added that there would be no cess on bidis.

Jaitley said that a major concession had been given to footwear and textiles as these are the items consumed by common man.

The GST Council had in its last meeting fitted over 1,200 goods and 500 services in the four-tier tax structure of 5, 12, 18 and 28 per cent. With government deciding to tax gold at 3 per cent, a new slab has come up. Tax experts said that some of the sectors may demand to place key items under this bracket in future.

“The decision to create a new rate category for gold, silver and diamonds at 3 per cent indicates that the government has maintained the parity with existing tax rates. However, this may open the door for other products to request special rates for their products or their coverage in the 3 per cent slab," said MS Mani, senior director, Deloitte.

The GST Council also approved the transition and return rules in its meeting today clearing the deck for July 1 implementation. It also agreed to set up a committee to look into complaints regarding anti-profiteering clause.

The next meeting of the Council has been scheduled on June 11 to consider any remaining issue before the launch date.

In a major relief to businesses, the GST Council in its meeting today decided to increase deemed credit to 60 per cent for products in GST slab of 18 per cent and more. This will neutralise the loss on transition stock to a large extent.

"Also, allowing 100 per cent credit in case of high value items (above Rs 25,000) based on tracking of the product, even without actual excise duty paying document could be a major relief to sectors such as consumer electronics, durables and automobile. The disruption in the trade, therefore, would be minimised," said Pratik Jain, partner and leader (indirect tax), PwC.

GST will subsume all major levies including excise, service tax, VAT, octroi and countervailing duty turning India into a single market. The removal of internal barriers is set to ensure smooth movement of goods and services. The tax reform is expected to add 1.5-2 per cent to the GDP.