Gold is one of the most valuable commodities in almost every Indian household. Indians have a natural proclivity for gold both as an ornament and an investment option. The gems and jewellery sector as a whole is a staggering 7% of India’s GDP, and 15% of her exports. The total size of the industry is pegged at around Rs. 5.3 Lakh Crore.
For an industry this big, any change in government policy is sure to create huge ripples. That’s why the 2019 Interim-Union Budget is an eagerly awaited one, both for gold traders and average Indians alike.
All eyes are on the GST rate on gold, which currently is at 3%. Considering the extensive GST rate effects on gold jewellery, this is a vital point of interest for consumers and businesses alike.
Import duty on gold
As of now, the import duty on gold is 10%. Back in 2013, the Government increased the rate several times from a mere 2%. Gold illegally entering India rose by 10% since the increase in import duty.
Such high rates forced several bullion dealers to move to the unorganised sector. 115 to 120 tonnes of gold are estimated to enter this country illegally back in 2017, especially through Dubai, out of the average 830 tonnes that India consumes every year.
Illegally imported gold reduced to 90 to 95 tonnes in 2018. Also, gold consumption was 760 tonnes in 2018, a decrease of 1.4% compared to last year. Similarly, the demand for gold bars and coins reduced by 4% according to the World Gold Council (WGC), owing to the GST gold rate.
However, the WGC is positive that the consumption of gold will be around 750 to 850 tonnes.
Reduction in import duty
Rating agency CARE expects the import duty on gold to go down to 5%. They also expect the following precious goods to undergo rate revisions from 7.5% to 5%:
Cut and polished coloured gemstone.
Lab cultured diamonds.
Half-cut/broken, semi-processed diamonds.
Cut and polished, non-industrial diamond (other than rough diamonds).
Contrarily, Pramod Kumar Agrawal, the Chairman of Gem and Jewellery Export Promotion Council (GJEPC) asked the Government to reduce the import duty on cut and polished coloured gemstones to 2.5%.
A decrease in the import duty and GST rate on gold will help bullion traders to avail more business revenue. Some can also go for additional funding to expand without making it a burden on their income.
Leading NBFCs such as Bajaj Finserv provide Business Loans targeted towards gold traders for their growth. The NBFC provides up to Rs. 30 Lakh in 24 hours against minimal documentation and with attractive interest rates.
The precious metal is one of the most important parameters of the Indian economy, from the foreign exchange to the local economy. Hence, all eyes are on the 2019 budget and the announcement new import duty and GST rate on gold.