New Delhi: Niti Aayog, the government's think tank, believes that the government should reduce import duties on gold from the current 10 percent and reduce the GST rate on the precious metal from the current rate of 3 percent.
It also said that the government should revise the gold-generating scheme and revise and renew the sovereign gold bond scheme and introduce a new gold savings account at banks, along with setting up a gold plate and precious metal exchanges across the country.
In its latest report, a committee led by Ratani P Watal, Chief Advisor to Niti Aayog said: "A reduction in customs duties in the past has been invoked to support compliance with tax legislation, combined with a significant reduction in the amount of gold to India has been smuggled.
"In this context, to make a tax-compatible system within the sector, it is important to reduce basic customs duties on gold to the lowest possible level."
The commission also proposed granting an exemption of 3 per cent of Integrated Goods and Service Tax (IGST) to be paid by an exporter with a bank guarantee.
This IGST exemption should also be extended to the supply of gold by foreign buyers, it said.
In addition, the committee said that there should be a reduction of GST on gold of 3 percent to appropriate levels. Salaried employees who receive gold from other states can be considered exempt from obtaining a GST registration.
Moreover, the threshold for exemption under GST, which is currently Rs 20 lakh, should be revised on the basis of value added, which can be determined on the basis of the average value-added-value-to-market value ratio for the sector concerned.
The GST fee for jewelry repair service must also be reduced from 18 percent to 3 percent.
The Committee recommended the deletion of the commodity transaction tax (CTT) on gold derivatives and a provision for exemption from capital gains tax for gold-related financial instruments.
Regarding the regulation for the generation of gold (GMS), the commission said that the Ministry of Finance should review and renew the scheme, with time-bound targets that may be laid down in an extensive gold policy.
It was also said that banks should be encouraged to set up more branches to accept gold deposits under the AGM, to allow deposits of just one gram and multiples and the transfer of gold that under the GMS is exempt from the scope of the GST.
The Committee, which was set up to recommend measures to transform the Indian gold market, proposed to introduce a "gold savings account" at banks, which accepts rupee incidents and credits gold in grams with a bank account facility.
It has also proposed to set up a new body "The Gold Board of India" and precious metal exchanges under the Ministry of Finance. This would be placed as a one-stop one-stop interface with the responsibility to formulate policy.
Gold as an asset in foreign currency would be professionally managed by the RBI, it added.
The committee said that the report provides a basis for the development of a comprehensive gold policy to position the yellow metal as an investment category.