The announcement made by Finance Minister Pranab Mukherjee on Monday provide a relief to the jewellery sector. As per the recent announcement made by the government of India, the implementation of the general anti-avoidance rules (GAAR) has been postponed by one year.
Government has decided to remove the excise duty of 1% imposed on all precious metal jewellery w.e.f. March 17, 2012. Along this the threshold limit for TCS (tax collection at source) on cash purchase of gold jewellery has also been raised from Rs 2 lakhs to Rs 5 lakhs. But the threshold limit on gold bullion has kept unchanged i.e Rs 2 lakh. This is proposed with the intention to reduce hoarding of gold.
The additional tax of 1% on every purchase of gold jewellery or bullion was imposed to track the cash transactions in the jewellery/ bullion market, but it has now been reduced as this additional tax of 1% on every purchase of gold jewellery or bullion have increased the cost of the purchase on the buyers but also created an administrative burden on the seller.
Which means for every purchase of gold jewellery the buyer will have to pay 1% tax on his/her purchase if deal exceeds Rs 5 lakh and for gold bullion the buyer will have to pay 1% tax on his or her purchase if deal exceeds Rd 2 lakhs. Every buyer will have to pay 1% tax on gold purchase with cash whether the purchase made by a manufacturer or by customers for personal use. This 1% tax will only be applicable on cash transactions, whereas purchase of gold jewellery or bullion through cheque payment will not be liable to pay any such tax at the time of purchase. Even after deduction of tax, if the money is shown at the time of filling tax return, than refund can be claimed on that 1% tax deducted.
This amendment will take effect from 1st July, 2012 and from then TCS of 1% will be charged on cash gold purchase of 5 lakh and above and gold bullion of Rs 2 lakh and above.
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