Bullion Gold Dealers and Jewellers claim that post the implementation of goods and service tax, the illegal trading of Gold has increased manifold. This has had a major negative impact on their businesses. The reason for this is the significant decrease in security checkpoints at different stages of the Gold sales cycle. Although gold dealers and jewellers in the organized sector hoped that the GST would prevent illegal trade as well as increase compliance, but on the contrary, the unorganized sector has flourished.
Ahmad MP, Chairman of Kerala-based Malabar Gold and Diamonds, said, “Since the implementation of GST, illegal trade has increased in gold.”. The problem is wide scale in South India which also happens to be the dominant consumer gold market in the country. Reportedly, Gold attracts 3% GST and 10% import duty.
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Kerala and Tamil Nadu have become the centre of illegal trade in gold. However, this trade is not limited to just south India. Illegal Gold enters India from neighbouring countries too. This further escalates the trouble. Illegal gold is sold at a lower cost, to disrupt smooth market operations.
B Govindan, Chairman Bhima Jewelers and All Kerala Gold and Silver Merchants Association said, “The investigation is not being systematically conducted. According to our information, there are 3,000-4,000 jewellery manufacturers in Kerala, but only 40 of them are registered under the GST. On June 19, we met the Finance Minister of India T.M. Thomas and we spoke on this matter. They have promised to take stern measures.”
India’s annual gold demand is between 800-850 tonnes. South India contributes 40% to this. Western India contributes 25%, North India constitutes 20% whereas East India contributes 15%. Ahmed claimed that illegal businessmen are smuggling gold in states without paying taxes. After that, they convert this gold into jewellery and sell it to people through direct selling agents. He said, ‘A large grey area has been left for inspection in GST system. It is not known who has been given the right to investigate and how to be investigated. For this reason, effective monitoring of Gold Trade is not possible. Illegal traders are taking advantage of it. They have invented new ways to avoid tax ‘. This has led to a large portion of the business in the organized sector to be subsumed by the unorganized sector.
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