Author Topic: Impact of GST on Coin Collecting in India  (Read 1621 times)

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Offline Bimat

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Impact of GST on Coin Collecting in India
« on: February 14, 2017, 04:43:37 PM »
As many of you are aware, government of India intends to implement GST starting this July, or latest by October 2017. Out of the four tax slabs proposed by the GST council, numismatic items will be coming under 18% tax slab (of course, applies only to those items which are sold with receipt). Many collectors believe that this rate is excessively high and some senior numismatists have already written to the government not to charge any tax (i.e. 0% tax) on numismatic items. No decision has been taken by the government yet.

Not sure if government will take this request very seriously, as only a fraction of the numismatic dealings are 'legal' and rest all are in cash/other forms. To me, such particular request, in fact, may attract government's attention towards the field and some strict measures may not be ruled out.

Will update further when we have more clarity on the subject.

Aditya
Caution. The low-hanging fruits are still there maybe for a reason.

Offline Abhay

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Re: Impact of GST on Coin Collecting in India
« Reply #1 on: February 14, 2017, 05:07:24 PM »
We all have to understand how this rate of 18% is arrived at. Basically, in the present system, there are two principal taxes - Excise Duty and the Sales Tax. The Excise is charged by the Central Govt. while Sales Tax (or VAT) is charged by the State Govt. On most of the items, the Excise is 12.5% and the VAT is 5%. So the total comes to 17.5%, which is proposed as 18% under GST. The Excise Duty is always charged on the MANUFACTURING of an item, while the VAT or Sales Tax is charged on the SALE of an item. Now the point in our (NUMISMATISTS or COIN COLLECTORS) favour is that the ancient coins are not MANUFACTURED now, and hence are not liable for the payment of Excise Duty part. Yes, for the coins being sold by the Mints, this theory will not apply, and there the rate of 18% GST can be justified.

Abhay
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Offline Bimat

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Impact of GST on Coin Collecting in India
« Reply #2 on: February 14, 2017, 05:12:50 PM »
We all have to understand how this rate of 18% is arrived at. Basically, in the present system, there are two principal taxes - Excise Duty and the Sales Tax. The Excise is charged by the Central Govt. while Sales Tax (or VAT) is charged by the State Govt. On most of the items, the Excise is 12.5% and the VAT is 5%. So the total comes to 17.5%, which is proposed as 18% under GST. The Excise Duty is always charged on the MANUFACTURING of an item, while the VAT or Sales Tax is charged on the SALE of an item. Now the point in our (NUMISMATISTS or COIN COLLECTORS) favour is that the ancient coins are not MANUFACTURED now, and hence are not liable for the payment of Excise Duty part. Yes, for the coins being sold by the Mints, this theory will not apply, and there the rate of 18% GST can be justified.

Thanks for the inputs, Abhay. I do agree that it's difficult to exempt numismatic items from GST. If they exempt currency, then there will be demand to exempt other historically important things like paintings, watches (yes, there's a market for these) etc. too. My personal opinion is that coins (or any collectibles in general) should not be excluded from the tax slab, but they can definitely put them in lower tax slab. :)

Aditya
Caution. The low-hanging fruits are still there maybe for a reason.

Offline quaziright

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Re: Impact of GST on Coin Collecting in India
« Reply #3 on: February 14, 2017, 05:24:00 PM »
I imagine the auction houses will pass these on to their clients and NGC and others like them will do similar things too. Otherwise I don't see this impacting most collectors. Even out west, its all mostly cash without any receipts

Offline Bimat

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Impact of GST on Coin Collecting in India
« Reply #4 on: February 15, 2017, 04:35:50 AM »
I imagine the auction houses will pass these on to their clients and NGC and others like them will do similar things too. Otherwise I don't see this impacting most collectors. Even out west, its all mostly cash without any receipts

Since GST is going to be applicable on online auctions as well, it will have impact on sellers/buyers who buy regularly through e-commerce websites like eBay. There's still not much clarity regarding overall GST (it was supposed to be implemented from April 2017, but got delayed due to demonetization), so we will have to wait until government publishes final draft of the bill. Quite a few states have expressed concerns over some of the provisions in the current draft and it may not be easy for the government to find a reasonable solution...

Aditya
Caution. The low-hanging fruits are still there maybe for a reason.

Offline Bimat

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Impact of GST on Coin Collecting in India
« Reply #5 on: March 01, 2017, 04:53:38 PM »
A number of Mumbai based auctioneers recently met finance minister of Maharashtra and requested him to consider their demand of minimum or no GST on numismatic items. A memorandum was given to him regarding the same. FM has assured them that he'll convey their demands to central government...

Aditya
Caution. The low-hanging fruits are still there maybe for a reason.

Offline Bimat

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Caution. The low-hanging fruits are still there maybe for a reason.

Offline Bimat

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Impact of GST on Coin Collecting in India
« Reply #7 on: May 23, 2017, 05:33:31 AM »
GST impact: Auction of coins, stamps on hold

Sharath S. Srivatsa

BENGALURU, MAY 23, 2017 00:36 IST
UPDATED: MAY 23, 2017 00:36 IST

Higher tax rate forces auctioneers to wait and watch at least till August; Indian Numismatic Association seeks exemption for antique coins

Keen numismatists and philatelists scouting for rare coins and philately materials through auctions in the country may have a long wait. For, the Archaeological Survey of India (ASI)-licensed auction houses have put on hold their auctions at least till August.

Higher GST rates imposed on antique coins and philately, and also on the commission charged for auctions, have forced auctioneers to wait for the GST rollout before deciding on future dates.

While Bengaluru saw its last auction in February this year, the next auction will not be held before August. Similarly, other auction houses, mostly in Mumbai, have put on hold their auctions indefinitely, industry sources confirmed. There are six ASI-licensed auction houses in the country that are authorised to auction rare coins.

“Philately and numismatics have been all along seen as a hobby, which is pursued by all sections of the society. These also help save the country’s history and heritage, and making these hobbies expensive by higher taxes is not fair,” said Rajender Maru of the Marudhar Arts, an ASI-licensed Bengaluru auction house in the country. “We (auction houses) have decided to wait and watch before we decide to hold auctions. In the proposed GST rate, we do not see many participating anyway,” he said.

Mr. Maru said that since he conducted his last auctions in February, he wants to wait till at least August before deciding on the next auction. “Auctions had been put on hold because of lack of clarity on tax rate. There was a rumour that coins and stamps would fall in ‘other’ category that would attract 28% tax. However, now the category has been defined as numismatics and philately chargeable at the rate of 12%.”

20 physical auctions

On an average, sources said about 20 physical auctions and 12 online auctions are held in the country in a year that attract several thousands of keen bidders, and the numbers have been growing. In the recent years, collection of antique coins is also considered as part of investment portfolio as many rare coins have given good returns in about five years period, sources said.

The oldest coin in India is about 2,600 years old belonging to Gandhara Janapada (kingdom), currently in Afghanistan that was part of larger India then. While the export of antique coins are banned under the Antiquities and Art Treasures Act, 1972, it can be only traded within the country.

Meanwhile, the Indian Numismatic Association has also sought exemption from GST on antique coins that are traded, and had even sought exclusion of coins from the definition of goods.

While numismatics as a hobby helps in preservation of heritage and cultural wealth of the country, the association had also pointed out at the negligible contribution coming from numismatic trade to the treasury.

“With the increase in rate, the market for numismatic will be drastically curbed as collectors would not like to invest in numismatic coins,” it said, adding that there is a need to accord special treatment.

“As it is, the market for antique coins and philately has been down by at least 25% due to changes in rules and also the effect of demonetisation. A higher tax would keep away hobbyists from making purchases,” sources said.

Commission

On the possibility to reduce the auction house commission to attract buyers, sources said that the auction houses were already running on thin margins, and any reduction would leave them in dire straits.

Buying set to get dearer

Sourcing rare antique coins and philately materials in the country’s fledging antique auction market is set to become dearer. The cost of the hobby materials in both physical and online auction markets will be about 15% more under the GST regime.

For the first time, 12% will be levied on old bank notes that are of great collectors’ interest while the antique coins and philately materials, including stamps and first day covers, will also attract 12%. The collectors, who on an average pay about 10% to 12.5% commission to the auction houses, will have to bear 18% GST on the commission, which will all come to about 26.75% of the value of the hobby materials on the auction price.

Under the current value added tax (VAT), antique gold and silver coins attracted 1% to 1.2% (varying from State to State) while copper, aluminium and nickel coins attracted 5.5%. In all, collectors paid about 15.5% of the value of hobby materials as VAT, service tax and auction house commission.

However, a direct purchase from the licensed store would only attract 1% VAT.

Source: The Hindu
Caution. The low-hanging fruits are still there maybe for a reason.

Offline Bimat

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Impact of GST on Coin Collecting in India
« Reply #8 on: May 28, 2017, 07:55:48 AM »
Old coins to lose jingle with 12-fold tax rise under GST

Bella Jaisinghani | TNN | Updated: May 28, 2017, 12.55 AM IST

MUMBAI: Collectors and dealers of antique coins and banknotes are anxious about a new levy that would be imposed on the trade under the new GST regime. Currently, numismatics attracts 1% tax under the value added tax (VAT) system, but under GST, the tax rate would be raised to 12%—a twelve-fold increase.

Numismatist Malcolm Todywalla, who runs one of the largest auction houses in India, said, "Tax rates levied on the purchase of antique gold and silver coins were always similar to that levied on bullion. So far, buyers paid 1% on each purchase. Now however, a separate category has been created which puts numismatics in the 12% tax bracket. Bullion, meanwhile, will attract 4-5% under GST. We should have been clubbed under the same tax slab."

Malcolm's father Farokh Todywalla, who set up the auction house 50 years ago, said that several representations, appeals and requests by the numismatic community to both the Centre and the state have fallen on deaf ears. "We appointed auditing firm Ernst & Young to prepare a report and approached the GST Council before the tax rate was promulgated. We met minister of state for finance Arjun Meghwal in Delhi and explained how numismatics helps conserve the country's heritage. We met ministers in Maharashtra also. We still hope they will pay heed. The order has not yet been notified," he said.

The business of numismatics has an annual turnover of Rs 60-70 crore nationwide. India has a handful of approximately six or seven big numismatists who are registered with the Archaeological Survey of India (ASI). These dealers trade in cashless mode by accepting cheque payment or online transfer. These are located in Mumbai, Gujarat and Karnataka. But much of the trade is informal and unorganized and thrives on cash. Large dealers say they are being penalised for being transparent whereas the cash-centric black market will continue to profit.

Numismatist Girish Veera explains the mechanics of the trade. "The bulk of gold and silver coins barely sell for 2-3% over the rate of bullion. For instance, a Jaipur gold mohur fetches Rs 32,000 even as the rate of gold is approximately Rs 30,000 per 10gm.

If buyers leave the market owing to this new tax, sellers will be forced to melt their old coins to extract at least the value of gold, or they will smuggle them abroad where taxes are low. Or people will simply deal in cash to avoid taxation. The business could be pushed underground in India. None of this fits with the current government's insistence on cashless payment and transparency," he says.

Veera points to the silver jewellers' town of Hupari near Kolhapur whose artisans like to source antique silver coins to extract pure metal to make payals. Melting old coins is a real danger, he says.

"Numismatics is vital to protecting and promoting Indian culture and heritage. Small kings and principalities who are forgotten even by history books are only remembered by the coins they minted. Even children and college students love collecting coins. History is also a hobby," he says.

Source: Times of India
Caution. The low-hanging fruits are still there maybe for a reason.

Online Figleaf

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Re: Impact of GST on Coin Collecting in India
« Reply #9 on: May 28, 2017, 12:00:16 PM »
If I were an Indian civil servant (and, to be transparent, I am not) I would be momentarily sympathetic to the enormity of the tax increase from 1% to 12%. Then reality would take over.

Collector coins (in the sense of coins people really do collect) are no longer money or never were money. They are a commodity. Moreover, they are a luxury item. Luxury goods should get the highest tax rates. If they got taxed 1% in the past, that is not a correct benchmark. They are taxed at around 20% in the EU, so 12% is not too bad.

However, collector coins are also items of national historic interest. Will there be melting of coins due to the tax increase? The answer depends on who pays the tax. In the EU, the buyer pays the tax (i.e. the tax is included in the price). This makes sense, because the market in luxury goods is always a sellers market. This means that sellers do not bear the cost of the tax increase.

Some buyers may give up on collecting, but those who do not give up act on an inverse demand curve, i.e. the higher the price, the better it sells (if you find that hard to believe, a company like LVMH operates on this principle). The two effects operate in opposite directions, so the end result cannot be predicted. Nevertheless, it would be rational to expect that only the worst looking coins would be melted, because remaining demand would be for the best (most expensive) coins. Any melting would therefore not harm the national historic interest. In fact, melting would liberate metal to be used in a more productive way.

Conclusion: when sellers complain, listen patiently, nod sympathetically and do nothing. When buyers complain, try to estimate how many will really give up collecting due to the tax increase.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline Bimat

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Impact of GST on Coin Collecting in India
« Reply #10 on: May 28, 2017, 01:52:37 PM »
Quote
When buyers complain, try to estimate how many will really give up collecting due to the tax increase.

I don't think anyone is going to leave collecting coins or other collectibles. More tax just means more cash transactions and that's it. Even auctioneers may now find it easier to sell high value items for a fixed price 'informally' to those who are interested. Online auctions may get hit but that impact would be marginal IMO.

Mint sets however, are going to become cheaper after GST. Current VAT rates are 12.5%-15%, so 12% means less expensive (although not much).

Aditya
Caution. The low-hanging fruits are still there maybe for a reason.

Online Figleaf

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Re: Impact of GST on Coin Collecting in India
« Reply #11 on: May 28, 2017, 02:41:21 PM »
What disappears into the black economy is a separate question requiring its own policy. Sure, a higher rate will encourage more leakage into informal transactions, but - reductio ad absurdum - that doesn't mean that you can stamp out unregistered transactions by abolishing taxes.

Much the same is happening in European countries, but we don't see it here, because the tax is included in the price. Nevertheless, I bet that if I buy in a coin shop or from an auction, I pay tax, if I buy in a coin show, I may pay tax and if I buy from a street seller, it is highly unlikely that I pay tax. In the end, the only ones who profit to a large extent are big speculators. They usually find out eventually that parking money in the coin market costs money. The small time collectors aren't worth the bother.

To illustrate the point: we have a large garden. To do major maintenance, we have hired a gardener, who comes with a small truck, good equipment and one or two sidekicks. One day, a guy in an unmarked car stopped and demanded to see the contract that required the gardener to work in our garden. No problem, but I doubt the guy would have checked on a single man working in a garden alone and with simple tools, even if it was next door, where they have an even larger garden.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline Abhay

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Re: Impact of GST on Coin Collecting in India
« Reply #12 on: May 29, 2017, 04:19:39 AM »
Dr. Dilip Rajgor on Facebook:

Implications of New GST Tax Slabs on Numismatic items:

Not a Devastating Scene

Dear Friends,

Since today morning a lot of people have been worried about the implications of New GST Tax Slabs on Numismatic items. Comments on social media and discussions thereafter have created a negative atmosphere among the numismatic fraternity.
The general feeling among the collectors and professionals is that this new slab of 12% Tax on numismatic items is going to make a catastrophic impact on collectors and the collectors are going to stop buying coins from auctions and auctions are going to be shut down. As a result, collectors will stop collecting coins, and our numismatic items will be melted down.
However, the new slab of 12% on numismatics is no doubt a very heavy burden for a budding hobby like ours, which is preserving Indian Heritage at a very large scale. Moreover, the effect of 12% looks quite heavy because, our numismatic fraternity was expecting the 0 % Tax slab on these items. Since we were looking at the present Government with a big hope that it will help us preserve our National Heritage, which at present we are doing at our own expense and are not getting a penny from the Government to do so.
But dear numismatic friends, with this new burden, the coin community has not lost all the hopes. We as a community are going to represent to the Government of India for a reasonable tax burden on numismatic items.
But in the meantime, lets have a look at the following calculations. The Collectors are not going to lose a lot of money, once you understand the overall calculations.

To sum, we as collectors, are going to pay slightly higher than what we have been paying till now.
This is how much more you are going to pay now:

On Coins of Other then Gold & Silver – you are paying Rs. 6.38 (5.30%) more
On Silver and Gold coins, - you are paying Rs. 11.18 (9.67 %) more
On Paper Money – you are paying Rs. 12.38 (10.83 %) more; and
On Items other then coins – you are Saving Rs. 00.12 (0.09 %)

So don’t lose heart, our numismatic hobby will keep progressing and we will have a bright future. The slight more Taxes we are going to pay are going to be used by our Government for our own betterment.
So keep collecting and preserve our Heritage,
With kind regards
Dr. Dilip Rajgor
Rajgor’s Auctions

Here is the detailed calculation for your information:
(1) Old VAT on Coins of Other Metals @ 6.00 %
Hammer Price 100.00
+ VAT 6.00% on Other Metals 6.00
+ Buyer’s Premium 12.5% 12.50
+ Service Tax 15% on B.P 1.87
You were paying Total Rs. 120.37 /-
New GST on Coins of all Metals @ 12.00 %
Hammer Price 100.00
+ GST 12.00% on all coins 12.00
+ Buyer’s Premium 12.5% 12.50
+ Service Tax 18% on B.P 2.25
Now you will pay Total Rs. 126.75 /-
You are paying more Rs. 6.38 /- = 5.30 % more

(2) Old VAT on Gold & Silver Coins @ 1.20 %
Hammer Price 100.00
+ VAT 1.20% 1.20
+ Buyer’s Premium 12.5% 12.50
+ Service Tax 15% on B.P 1.87
You were paying Total Rs. 115.57 /-
New GST on Coins of all Metals @ 12.00 %
Hammer Price 100.00
+ GST 12.00% on all coins 12.00
+ Buyer’s Premium 12.5% 12.50
+ Service Tax 18% on B.P 2.25
Now you will pay Total Rs. 126.75 /-
You are paying more Rs. 11.18 /- = 9.67 % more

(3) Old VAT on Paper Money @ 0.00 %
Hammer Price 100.00
+ VAT 0.00% 0.00
+ Buyer’s Premium 12.5% 12.50
+ Service Tax 15% on B.P 1.87
You were paying Total Rs. 114.37 /-
New GST on Coins & Paper Money @ 12.00 %
Hammer Price 100.00
+ GST 12.00% on all coins 12.00
+ Buyer’s Premium 12.5% 12.50
+ Service Tax 18% on B.P 2.25
Now you will pay Total Rs. 126.75 /-
You are paying more Rs. 12.38 /- = 10.83 % more

(4) Old VAT on Items Other then Coins @ 12.50 %
Hammer Price 100.00
+ VAT 12.50% 12.50
+ Buyer’s Premium 12.5% 12.50
+ Service Tax 15% on B.P 1.87
You were paying Total Rs. 126.87 /-
New GST on Items other than Coins @ 12.00 %
Hammer Price 100.00
+ GST 12.00% on all coins 12.00
+ Buyer’s Premium 12.5% 12.50
+ Service Tax 18% on B.P 2.25
Now you will pay Total Rs. 126.75 /-
You are Saving Now Rs. 00.12 /- = Saving 0.09 %
 🙂🙂🙂
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Offline Bimat

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Impact of GST on Coin Collecting in India
« Reply #13 on: May 29, 2017, 05:34:35 AM »
Problem with Mr. Rajgor's sample calculation is that he has taken the base price as ₹100. Make it ₹50,000 (normal for a gold coin) and the impact is more visible. Rich collectors anyway will not be affected much...

Aditya
Caution. The low-hanging fruits are still there maybe for a reason.

Online Figleaf

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Re: Impact of GST on Coin Collecting in India
« Reply #14 on: May 29, 2017, 01:23:44 PM »
It should be clear that Mr. Rajgor, as an auctioneer, has an agenda. He doesn't worry about the tax increase, because it will be paid by the seller. He worries about people giving up collecting and wants to reassure them. That is his right and he goes about it fairly by including both percentages and absolute amounts.

Yes, the hammer price of 100.00 is low, but it was undoubtedly chosen for ease of calculating. A higher hammer price would result in higher tax differences, but percentage wise, there would be no difference. In addition, more expensive coins would be bought by collectors with a bigger budget, who would worry less over the absolute difference in tax payment.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.