In order to prevent tax leakages and curb off-the-books transactions, the Goods and Services Tax (GST) Council in India is set to finalize rules to monitor the transportation of gold and precious stones worth ₹2 lakh or more by merchants. The proposed measures will enable states to track and regulate the movement of these valuable commodities, ensuring compliance with tax regulations. This move comes as part of the government's ongoing efforts to formalize the economy, reduce cash transactions, and create a robust financial trail.
The proposed rules empower states to mandate GST-registered entities to generate e-way bills or electronic permits for the movement of gold and precious stones within the state, above the specified threshold. By requiring sellers to raise electronic permits, authorities can maintain oversight and detect any non-compliant transactions. This development follows a recommendation made by a ministerial committee, led by Kerala finance minister K.N. Balagopal, emphasizing the need for stricter regulations in this sector.
The implementation of e-way bills for intra-state transportation of gold and precious stones is expected to serve as a deterrent to tax evasion. By creating an audit trail, the GST system can leverage e-way bill data to pre-fill a merchant's sales return, ensuring greater transparency and accountability. This measure aligns with the government's broader objective of curbing tax evasion, reducing the use of cash, and promoting a formalized economy.
While the introduction of e-way bills for gold transportation appears promising, its effectiveness on the ground remains to be seen. Compliance with these regulations may pose challenges, particularly in monitoring off-the-books transactions and ensuring widespread adoption by all stakeholders. However, industry experts believe that the measure has the potential to empower state authorities in detecting and taking action against unauthorized shipments.
In addition to addressing the gold loophole, the GST Council meeting will focus on several other legislative changes aimed at minimizing tax revenue leakage. One such sector under scrutiny is the pan masala industry, known for high margins and a higher propensity for tax evasion. The Council plans to introduce stricter regulations, including machine registration and capacity monitoring through the GST portal, as well as the incorporation of quick response (QR) codes on product packaging.
Another significant clarification expected from the GST Council pertains to tax collected at source (TCS) liability on e-commerce transactions involving multiple operators. Given the recent launch of the Open Network for Digital Commerce (ONDC) initiative, which aims to enhance digital commerce through interoperability, it becomes crucial to establish clear guidelines for tax compliance within this evolving ecosystem.
The 50th GST Council meeting aims to streamline the GST framework further and build on the efficiency achieved in recent months. The record monthly tax receipts of ₹1.87 trillion in April demonstrate the effectiveness of the GST system in generating revenue. As part of the meeting, ministerial groups are expected to be reconstituted to examine the need for tax rate adjustments and other key areas requiring attention.
The GST Council's efforts to close the gold loophole and enhance monitoring of precious commodities demonstrate the government's commitment to curbing tax evasion and creating a formalized economy. By introducing e-way bills for intra-state transportation, authorities aim to establish an audit trail that facilitates compliance, transparency, and accountability. However, the effectiveness of these measures will depend on their implementation and industry-wide acceptance. As the GST framework continues to evolve, it remains crucial for stakeholders to adapt and contribute to the growth and integrity of India's tax system.