Can 5% GST on Gold be a U Turn/ Reverse Gear ?

When any reform affects our safe heaven- ‘GOLD’ there is an undoubted prediction for the economy. Indians are thought to, or so actually have more gold than combined reserves of continents. Not only our mothers love it but our fathers still keep gold biscuits treasured in their lockers for our weddings.

Past year saw many tornados in the gold Industry, starting with excise duty imposed on the industry to the 41-day strike by and finally demonetisation affected gold consumption and revenue for the business. Additional restrictions including PAN card norm for purchases above 2 lakh brought in mixed reactions too. Gathering our attention to the main event, the above said scenario became a fact ! Jewellers were open post midnight to absorb the demonetisation shock, or simply to take advantage of excess black money Indians possessed or the pressure to sell at whatever price they could. This sudden panic surely affected them as they hardly gave a bill and mostly accepted cash. Cut to a week later, when the had no buyers, demand had fallen by 80 per cent despite the on-going peak marriage season. Price went down from 31,ooo on demonetisation eve to 28, 942 today.

Before we could absorb all of it, its less than 9 months and we have a premature baby on board. The GST Council slashed indirect tax on making charges to 5 per cent from 18 per cent. The cut will not only reduce the burden on consumer, but also promote greater transparency. The transaction brunt cost has increased from about one per cent to three per cent. From the government’s point of view, this is in line with their scheduling — don’t endow in physical gold, relatively invest in gold sovereign bonds. The consumer will also be enhanced of as there is an interest coupon attached to bonds and it tracks local gold prices but what’s in for the industry is still opaque . In my opinion, the export business will also be wounded as we depend on imported raw material.

Demand is anticipated to climb between 850 tonnes to 950 tonnes by 2020 from an estimated 650 tonnes to 750 tonnes in 2017 buoyed by the new tax regime, the World Gold Council report quoted.There would be surely less probability of informal sector existence as no one would be out of indirect tax net now onwards. While the industry will go through a period of adjustment, the net impact is expected to be positive, but lets not be too positive because its GOLD.The long term outlook is hard to read due to the sheer number of factors impacting the precious.

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