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Understanding How To Mainstream Neglected Rural Population For High GST Collections
Since the market for Gold in India is vast, so is the tax income from the market. With the introduction of a new, uniform indirect tax under the Goods and Service Tax (GST) in 2017 in India, the prices of most goods and services have been modified.
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India is well-known for its love for Gold. From weddings and festivities to investment, the country has a hefty consumption of Gold annually. Gold is, thus, a significant contributor to the Indian economy and plays a crucial role in its regulation.
Further, Gold has several uses that translate into large-scale economic activities. It is used in making jewelry of various kinds, coins, bars, etc. The gold industry is, therefore, home to several small and big businesses. All of the companies that are a part of the gold industry are significant sources of business opportunities, employment generation, and value addition (which includes enhancing the value of Gold through producing jewelry, retailing, metals trading, and exports). According to Niti Aayog's report, India's gem and jewelry industry is valued at a whopping 6.5 trillion INR. Gold is, thus, one of the prominent industries of India.
Gold and Tax:
Since the market for Gold in India is vast, so is the tax income from the market. With the introduction of a new, uniform indirect tax under the Goods and Service Tax (GST) in 2017 in India, the prices of most goods and services have been modified. The interest on Gold too was changed from VAT 1 per cent to GST 3 per cent. Given the size and valuation of the Indian gold market, as stated above, it can be said that our huge gold market contributes significantly towards the tax collection of the Government annually.
Rural India: The Goldmine of tax:
We have already established the fact that Gold is one of the leading players in the Indian economy. However, within this industry, several aspects dictate its characteristics. One of the most significant dictators of an industry is its consumers. As per Niti Aayog's report, 60-65 per cent of India's gold consumption can be accounted to the rural counterparts of the country. Since a Goods and Service Tax of 3 per cent is levied on Gold, rural India is an untapped 'goldmine' of tax money and development.
Even though the demand and consumption of Gold are so high in rural areas, there is no way of truly determining if all the Gold being sold is being accounted for as per Government norms. The awareness and understanding of the complex Goods and Service tax took substantial time to spread in urban areas. Thus, the rural areas to are facing challenges with the tax procedure. However, the challenges brewing from this problem are not restricted to a mere lack of understanding.
If Gold or its products are sold without proper implementation of GST as per Government rates, the tax that was to be levied on the purchase gets lost or laundered. This problem causes a lot of losses in terms of tax collection to the Government.
Additionally, the higher tax rate on Gold and its making charges may also lead to purposeful aversion of tax by the rural population. Another problem in the field is the smuggling and stockpiling of Gold. Since Gold is an investor-favored commodity, it is frequently smuggled and piled by people.
All the Gold that goes into the above-mentioned transactions is not taxed and hence causes heavy loss of tax money which could have been used for the development of the country and for boosting our economy.
Increasing tax collection on Gold from rural areas:
To avoid tax aversions, there is a severe need for the Government to regulate the buying and selling of Gold in rural areas. The Government should implement proper billing systems and raise awareness about GST amongst the masses. This is because informed consumers, by buying through only Government-regulated sources of Gold, can help combat tax loss. Further, they can also save themselves from possible frauds in the name of tax. Thus, it is very important to educate the rural population about the tax levied on Gold to the best of their understanding for the mutual benefit of the Government and the people.
Rural India is a vast but neglected center of taxes for the Government. Due to the lack of proper implementation of policies and ill-awareness of Government norms, a lot of Tax money has been lost in the rural areas over the years. Rural India is a massive hub of gold consumption, and since Gold is a decently taxed commodity, there is an acute need for the Government to look into and regulate the selling and purchasing processes. If immediate steps are taken, the Government can transform the situation.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.