Tax authorities have identified purchases of gold bullion
and jewellery as the second-largest parking space for black money
next only to real estate. CBDT member (investigation) K. Madhavan Nair told Mail Today
that "huge amounts of gold are imported
every year into the country and it then goes into a black hole with no trace".
India's gold and silver imports during the first 11 months of the current financial year are valued at $54.5 billion. The country had imported gold worth $40.5 billion and silver worth $1.9 billion in the last fiscal and the ratio between the two precious metals is roughly the same for 2011-12. The World Gold Council puts India's annual gold imports at a whopping 969 tonnes.
The one per cent tax collection at source, introduced in the Budget for the first time, on the purchase of gold bullion and jewellery aims to check flows of black money into this segment and increase the government's revenue as well. The tax has to be paid for all purchases in cash whether it be by a manufacturer or those buying the commodity for personal use.
The tax is applicable only on cash transactions and if the purchases are made through cheque, there is no problem as the money is considered to be accounted for. Nair explained that even in the case of cash transactions, if the money is shown in the filing of tax returns, then a refund can be claimed on the one per cent tax deducted in the purchase of bullion or jewellery.
Nair also feels that the big hue and cry that the jewellers are making over the imposition of excise duty on jewellery has a black money angle to it. Once the excise duty kicks in, there is a trail for the Income Tax authorities to follow up as well, which apparently worries jewellers more.
CBEC chairman S.K. Goel holds the same view. "While the jewellers have been protesting about the one per cent excise duty being introduced on non-branded jewellery, after abatement this works out to a mere 0.3 per cent as the duty is charged only on 30 per cent of the transaction value," he explained. "Apart from this, the small-scale sector which the protesters are talking about has been exempted from the excise tax," he pointed out. According to Goel, the real reason for the protests seems to be that jewellers are concerned over the income tax fallout of the move as the transactions will become more transparent.
"The search and seizure operations carried out by the Income Tax Department also throw up huge quantities of unaccounted wealth in gold and jewellery as these are high value items which can be stored in a limited space such as a bank locker," another senior official said.
Nair pointed out that the Budget has introduced more stringent provisions for taxing black money in so far any declaration made even during the course of an IT Department search operation will face a 10 per cent penalty in addition to a 30 per cent tax.
Earlier, if any declaration was made at the time of search, a tax of 30 per cent was levied on the unaccounted money and the assessee did not have to pay any penalty.
The imposition of penalty is expected to act as a deterrent for those who think they can dodge taxes.
Courtesy: Mail Today