Kolkata: A complex and higher goods and services tax (GST) structure can pull down gold consumption in India by 4% in 2017 to 650 tonnes, compared with 675.5 tonnes last year, said a senior World Gold Council (WGC) executive, adding that if the tax incidence on the yellow metal in the post GST regime is not below 12%, then chances of gold entering through the grey route will increase.
WGC says around 100,120 tonnes of gold had entered India through the smuggled route last year. “There are concerns about transitioning to GST that will kick in from July 2017.
Though introduction of GST is widely welcomed by organised players, as it seeks to mandate transparency and enhance consumer value, there are concerns about the level of tax.
“For the gold industry to emerge as the harbinger of the transformation to transparency, which seems to be the focus of all recent reforms, GST coupled with import duty, needs to be below the current level of 12%. Based on these parameters, we have kept consumption at 650 tonnes on the lower side and 750 tonnes on the higher side, depending on how smooth the transition will be to GST regime,“ Somasundaram PR, mana ging director, India, World Gold Council, told ET.
At present, gold attracts an import duty of 10%, a VAT of 1% and an excise duty of 1% which together adds up to 12%. “Import duty and GST put together should be much below 12%,“ he said. He also said that the government should come out with a recycling policy and simplify the record keeping process in dealing with old gold, post the GST regime.