The upcoming goods and services tax in India will be impacting the gold consumption at a rate of 4 percent as speculated by the World gold council (WGC) executive in a recent meeting. GST is said to impact the gold consumption for around 4 percent in the year 2017 to nearly 650 tonnes. In the previous year, it was around 675.5 tonnes told by the executive of the WGC. The executive continued on to flash over the issue of the grey route which can be used for gold entrance in case, the government doesn’t pull down the rate of gold below 12 percent.
It is speculated that in the previous year there were about 100 to 120 tonnes of gold which were smuggled through the gray routes into the India, as told by the World Gold Council. It also added that “There are concerns about transitioning to GST that will kick in from July 2017.” As the GST was totally acceptable to the community of small to big players in the market but also the huge corporates welcomed it wholeheartedly. It was determined by the GST council and the government to make the GST transparent and to maintain the highest degree of consumer values but still, there are concerns related to the level of the tax.
Somasundaram PR, managing director, India, World Gold Council mentioned in an interview that, “For the gold industry to emerge as the harbinger of the transformation to transparency, which seems to be the focus of all recent reforms, GST coupled with import duty, needs to be below the current level of 12%. Based on these parameters, we have kept consumption at 650 tonnes on the lower side and 750 tonnes on the higher side, depending on how smooth the transition will be to GST regime.”
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Currently, the gold taxation is calculated as import duty of 10%, a VAT of 1% and an excise duty of 1% which makes a total of 12%. Somasundaram PR also added that “Import duty and GST put together should be much below 12%, the government should come out with a recycling policy and simplify the record keeping process in dealing with old gold, post the GST regime.” Right now, the gold demands stand at Q1 of 2017 at 123.5 tonnes, increased 15%, compared with the total Q1 demand for 2016 (107.3 tonnes).
