The Union Cabinet on Wednesday gave its nod for the much awaited Gold Monetisation Scheme (GMS) and Sovereign Gold Bonds Scheme (SGBS).
The Centre also sweetened the deal for those opting to purchase SGBS by promising to extend indexation benefits (on transfer of gold bonds) as well as capital gains tax exemption on redemption of such bonds.
The approval of these two schemes fulfils two key announcements made by Finance Minister Arun Jaitley in this year’s Budget speech. The Cabinet approval is significant as it would address some of the perennial problems that have been afflicting the economy, Economic Affairs Secretary Shaktikanta Das told reporters here. The “perennial problems” referred to by him are the excessive level of gold imports undertaken by India for savings purposes, and the large quantity of unproductive gold stashed by households.
The GMS and SGBS are aimed to ensure that idle gold is used for productive purposes, and that the use of gold as a savings instrument gets a viable replacement.
Das highlighted that India imports 800-1,000 tonnes of gold every year. By one estimate, as much as 30 per cent of these imports go in directly as savings.
“Through these two schemes, the government wants to tackle twin problems — excessive import of gold for savings and how to make productive use of idle gold in households,” he added.
Minimum quantity
For the GMS, the minimum quantity of gold required is 30 gram. The scheme is expected to provide a fillip to the gems and jewellery sector in the country by making gold available as raw material on loan from banks.
The new GMS covers the revamped Gold Deposit Scheme and the revamped Gold Metal Loan Scheme.
The GMS and SGBS, which will be denominated in grams, are much better than the earlier versions as investors will now benefit from the appreciation of the gold value, said Das.
Sovereign gold bonds will be issued on payment of rupees and denominated in grams of gold.
Das made it clear that there would be no compromise on know-your-customer (KYC) norms, which will be verified before allowing participation in the schemes.
“The source of purchase of gold that is being offered for GMS will be verified. The government does not want unaccounted for money to get converted into white via such schemes,” he said when asked about people offering hitherto undeclared household jewellery for the GMS.
For the GMS, the tax treatment will be the same as those currently extended to the Gold Deposit Scheme, Das said.
In the case of GSBS, the revenue department has agreed to consider extending indexation benefit and also capital gains tax exemption on redemption of bonds.