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Art Tax. How will it aff ect the Indian Art Market? Should art work be taxed at all? – ART & DEAL CORRESPONDENT

As of July 1st 2017 the BJP government has implemented GST (Goods and Services Tax) which will dismantle state barriers and merge a variety of taxes into one, supposedly simple, tax system. The new system involves businesses registering for GST, obtaining a company GST number and charging GST tax on their supplies at the prevailing rate. GST has been broadly classified into four categories; 5%, 8%, 12% and 28% with precious metals such as gold being taxed at a separate rate of 3%.

The foreseen benefits of the new system are that, from the consumer point, it will bring down tax overall due to the elimination of ‘tax on tax’ as the new regime follows a multi collection mechanism where tax is collected at each stage and the credit of tax paid is set-off at the next stage of transaction. Tax evasion will also be minimised by the new system as the entire transaction process will be monitored, meaning accountability for all parties involved in the transactions made.

The new system will encourage traders and manufacturers to become registered companies as continuing to trade with this system in place will become increasingly difficult to trade as an unregistered business. So in defence of GST, the number of rogue traders and tax evaders should, or so the government tell us, should eventually decline.

Alongside all of the purported positive effects of GST, we are seeing the rise in price in certain products and services such as air travel, hotels, insurance premiums, cigarettes, branded clothing, and even mobile phone calls. The service industry will bear the brunt of higher taxes as it has risen from 15% to as much as 20%. Along with the huge list of increased tax on certain goods and services, we are also seeing declines such as in the cost of small cars, made-in-India electronics and others.

The one thing for certain about GST is that as a nation, we are uncertain of how the effects of GST will unfold, and many of us are confused on the exact workings and implications of this tax reform.

Art and Deal Magazine have collected the opinions of a range of practicing artists, curators and gallerists, who have been asked their thoughts on how GST may affect the Indian Art Market.

The reform has listed art and antiquities under the 12% bracket; this includes paintings, sculptures, original engravings, prints, drawings and antiquities over 100 years old. This is a sector which was completely exempted from VAT in some states including West Bengal and Rajasthan had a far lower VAT rate. Some worry that the tax will negatively impact an already suffering art industry (after demonetisation) in the country, which should be encouraged instead of taxed. Some state that it makes little difference to the majority of states. There is also the worry that the tax will lower sales of art and seriously affect the lives of artists working on a smaller scale, while galleries may not feel the pinch as much.

(Sangeeta Gupta, Chief Income Tax Commissioner, Delhi, Visual artist, Poet & Film Maker)

We will all see how the situation unfolds in the coming months, but one thing is for sure; there’s no end of speculation when it comes to the probable effects of GST. Here are some from India’s art sector, and to start we have Sangeeta Gupta, abstract visual artist and income tax officer to start us off with some facts:

“Painting and art galleries etc. will come under the ‘Goods’ category of the new Goods and Services tax, GST. There is a huge list of items and it has been decided which items come under which category, and under which tax bracket. They have categorised Art in terms of whether the artist is registered or not – artists don’t have to be registered if, for example, they don’t have a commercial sales office or their own gallery. So ultimately the art gallery needs to be registered for GST. If the artist isn’t dealing with sales directly, for example if they are selling through an art gallery, then they are not at all directly affected by GST. Once an art gallery is registered (which they can do via an online process) if for example they are selling a painting for 100rs on a 50% commission basis, 50rs would go to the artist, and the other 50rs is where the gallery would have to pay GST from.

In regard to states which previously had no tax on art and antiquities, which were very few and far between, it was the state which suffered ultimately. Under GST there are two components, part of it goes to central and part of it goes to the state, if the state is not charging any tax then it’s not getting anything at all.

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