The World Gold Council is making a case for a low tax structure for gold under the GST regime to ensure better transparency in the trade and to boost demand.
The current tax structure is 12.5 per cent, which includes Customs and Excise duties and VAT. “Our point is that the duties should be substantially lower,” PR Somasundaram, Managing Director - India, World Gold Council India, said.
India’s gold demand, according to him, remained more or less flat in the first quarter of 2017, despite initial trends pointing to a revival. Though consumption witnessed a 15 per cent growth during the January-March period, touching 123 tonnes, it was on a low base of 107 tonnes in the first quarter of 2016. Moreover, the figure is 18 per cent below the five-year average.
The average gold demand in the country is 800-900 tonnes. Last year, it registered a 27 per cent drop at 675 tonnes, compared to 863 tonnes the year before.
Adverse impact The jewellers’ strike, rules in respect of disclosing PAN card details, the currency demonetisation, and the income disclosure scheme targeting black money took a toll on demand growth in the short term.
“However, we see a growth in consumer demand in this quarter, at least on a narrow level. The target this year is 650-750 tonnes, and a combination of factors like good monsoon forecast, remonetisation, low tax rate structure post-GST may push up sales,” he said.
Somasundaram, who was in Kochi for the launch of the Malayalam version of WGC’s Gold Market Report, said the global demand for gold was down 18 per cent whereas India witnessed a 15 per cent growth. The first quarter of 2016 was an exceptionally good year for gold globally, but poor for India.
According to him, the demand for gold always responds to income growth. When income goes up 1 per cent, gold demand increases by 2.5 per cent.