MUMBAI:
Stamp collectors have written to finance minister Arun Jaitley asking him to spare their hobby from the steepest slab of 28% under the goods and services tax (GST), which is expected to be rolled out on July 1. The fear is that collectibles such as stamps, coins, paintings and antique items may be treated as ’unclassified goods’ and hence face the highest GST rate.
"We are aware that the government and the finance minister have too much on their plate on GST but a tax would be a death blow for stamp or coin collectors," said Siddharth Bothra, vicepresident of the All India Philatelists’ Association. "Especially where high-value stamps are involved, all collectors prefer to undergo a transparent process and they will have to pay taxes under GST."
In April, a 1948 stamp bearing the likeness of Mahatma Gandhi was sold for Rs 4 crore. That price would escalate by about Rs 1 crore if the worst fears of collectors are realised.
"The issue of applicable rate of GST to transactions is assuming significant importance, like potentially a transaction of dealing in items which are hobbies, like philately and coin collection," said Dinesh Kanabar, CEO of tax consultant Dhruva Advisors and an avid stamp collector. "Under the GST regime, these could be regarded, for example, as unclassified goods and subjected to a high GST, which could have the effect of significantly dampening the hobbyists."
Under GST, even an exchange is considered a transaction, experts said. However, determining the value of such a transaction may be difficult as the object may well be unique and hence there will be no benchmark for comparison.
"Not just buying or selling of stamps or coins but even exchanging those by an individual or a gallery would come under GST’s gamut," said Sachin Menon, partner and head, indirect tax, KPMG in India. "However, this can be implemented only if one of those individuals involved is registered and conducting these exchanges or buying, selling openly, and may not be effective in the grey market."
The government has still not unveiled product categorisation, or what fits into which slab. Since categorising collectibles can be tough, they could face the highest tax after being clubbed under unclassified goods.
A tax official based in Mumbai said there could even be taxes on paintings under GST but the problem is that many people buy paintings partially in cash, he said. Some, however, see a silver lining.
"While GST at around 28% could apply on many transactions, whether exchange or purchase of paintings, stamps, coins or other antiques, there is a chance that under the new tax regime, this would be more transparent," said MS Mani, Senior, director, Deloitte Haskins & Sells.
"Mainly because the buyer may be able to get the tax credit --provided the buyer uses these for his business or is directly engaged in these businesses -- and hence effectively the acquisition cost of the antique could become lesser."
Currently, most paintings, stamps and coins escape taxation if both buyer and seller are individuals at an auction.
However, many buyers, especially of paintings, deal outside the income tax net, or through their family offices or companies to escape taxes, said experts.
Even when galleries conduct sales, they escape taxes most of the time and value-added tax (VAT) is applicable only in a few situations. So, if a private Indian collector were to buy Saurashtra by SH Raza after July 1 it could cost more than Rs 20 crore instead of Rs 16 crore, a record at a Christie’s auction in 2010, appreciation notwithstanding.
13 May 2017, 09:42 AM