India To Hit Gold Market With 3% Tax On July 1
India will be rolling out a new 3% nationwide sales tax on gold and gold jewelry as soon as July 1, this according to the country’s GST Council, which met during the weekend to finalize the numbers.
“We finally reached a consensus of taxing gold at 3 percent,” Finance Minister Arun Jaitley told media outlets in New Delhi.
The new bracket will force consumers to pay a total of 13% in taxes on gold jewelry. This number consists of 10% import duty and 3% GST. Right now buyers pay around 12.5%.
The 3% Goods and Services Tax (GST) will also apply to silver and processed diamonds.
The GST Council made its decision during the 15th meeting, which took place on Saturday and was chaired by Jaitley. Other GST rates were also set at the meeting, impacting yarns, agriculture machinery, and apparels.
The Council is scheduled to meet again on June 11 to review the rates one more time before the actual rollout date.
The uncertainty around the new tax rate had many jewelers worried, as they hurried to restock their inventory prior to the introduction of the new law.
Some organizations believe the new GST could be used to stabilize the gold market in India.
“This may be an opportune time for the government to cut the import duty and bring down the total tax on gold significantly so unauthorized imports are totally eliminated and the industry embraces transparency in letter and spirit under GST,” World Gold Council’s managing director for India, Somasundaram PR, said in a statement.
In another comment, director of WHP Jewellers, Aditya Pethe, said: “With this taxation, many unorganized players will be encouraged to enter the organized trade.”
But, bringing illegal gold trade out of the shadows could be difficult, according to another industry expert.
“With GST, the total duty has become very high and the customs duty maybe revisited,” director general at Federation of Indian Export Organisations, Ajay Sahai, told The Economic Times. “The duty could be one of the highest among major gold consuming countries, which could lead to high incidence of smuggling.”