GST impact on gold

GST impact on gold: Be ready to pay more from July 1 as gold prices set to rise

Although slightly, gold will become costlier than it already is after Goods and Services Tax (GST) comes into effect from midnight. The yellow metal much-loved by Indians will attract taxes to the tune of three per cent under the new tax regime, around one per cent higher than what it is today.
Till now, one per cent excise duty was slapped on gold and around one per cent was levied by most of the states as Value Added Tax (VAT). Only Kerala used to tax gold at five per cent. The buyers in states other Kerala will be benefitted, thus. Reports suggest that customers are turning up in numbers at jewellery shops to purchase gold items before prices go up after midnight.
While buyers in Kerala will have to spend less for gold than they have been, state government is looking up to the Centre to cover the losses in revenue it will see once the new rates are effective.
On the other hand, uncut diamonds will be taxed at 0.25 per cent to keep the audit trail. Like gold, three per cent will be levied on silver and polished diamonds as well. Coupled with making charges taken by jewellers, the prices are likely to go up.
Suresh Nair, Tax Partner, Ernst and Young, said, "Inspite of a near vertical division, the GST Council manages a consensus on rate of tax on gold at 3 per cent.  This adds on to another new tax rate under GST regime. It would be interesting to watch the trade community reaction in the transition phase given that the GST rate in most states could be higher than the overall current effective tax rate on gold.  States with higher VAT rate would be hopeful of compensation from the Centre to bridge the gap, if otherwise not taken care of."
Meanwhile, the World Gold Council has welcomed the step to apply 3 per cent GST on gold by calling it an 'encouraging step in the current context to stabilise the industry, it has said that with the current import duty of 10 per cent the total tax on gold is still high and will continue to have an impact on the jewellery industry. Therefore, the Council has asked to bring down the import duty on gold.
Source:http://www.businesstoday.in/current/economy-politics/gold-prices-rise-with-gst/story/255482.html

Indian gold lust will stay more and will not die according to Kalyan Jewellers

 
Indians have lusted over gold for more than 2000 years and this lust may not die down soon according to Kalyan Jewellers. In an interview with ET Now, T.S. Kalyanaraman, Chairman and Managing Director (CMD), Kalyan Jewellers said physical gold has held a sentimental value for Indians since the past 2000 years and will continue to do so as people want to buy gold ornaments for the joy of wearing them. This trend will not go and the fact that the gold ornament business is increasing in size every year is a clear indication that people do want to buy physical gold rather than Gold bonds.
Along with Kalyanaraman, his sons Rajesh and Ramesh were a part of the interview as well. The top management of the company said that there has been no change in the buying pattern after demonetization but the payment pattern has definitely changed as post demonetization customers prefer to pay by digital means.
On comparison of gold bonds with gold ornaments, they said that people buy ornaments on events such as marriages, birthdays etc for wearing pleasure and it can be an investment too as the ornaments can be liquidated if needed.
The top executives of the company said that they spend only 1-2% of their revenue on advertisement and marketing, but since their revenue is high compared to other companies therefore their spending on advertisement and marketing may seem huge.
They said the company doesn’t have much competition in the organized sector but the organized sector is a big competitor. On GST they said that the tax reform, India’s most comprehensive till date, will help unorganized sector move to the organized sector only if the tax rates for jewellery are kept low, as higher rates will prove detrimental. The management also said that the government should consider lowering import duty on gold and continue to monitor the gold jewellery industry closely.

 

source: http://www.financialexpress.com/industry/heres-why-kalyan-jewellers-believe-indians-lust-for-physical-gold-will-stay/651135/

Kerala

About Kerala gold industry