The Goods and Services Tax (GST) is likely to pose challenges for the gold demand in the short term when small-scale artisans and retailers may struggle to adapt to the new tax regime, the World Gold Council (WGC) on Thursday said.
“In the short term, we believe GST may pose challenges for the industry. Small-scale artisans and retailers with varying degrees of tax compliance may struggle to adapt,” WGC Director, Market Intelligence, Alistair Hewitt said in the fourth issue of magazine ‘Gold Investor’.
He said on June 3, the GST Council announced a 3 per cent rate for gold bullion and jewellery. The gold industry reacted positively to this as there had been fears that it could have been higher, perhaps 5 per cent or more, Hewitt added. “Our econometric research into data spanning 26 years indicates the tax may pose a headwind to gold demand, because it pushes up the overall tax rate consumers face,” he said.
Despite these possible obstacles, Hewitt said WGC believed demand is unlikely to go down further, after falling so sharply last year. The gradual remonetisation of the economy, the bumper crop after a good monsoon and the Central government employees and pensioners’ inflation-busting wage hike can support economic growth in 2017, he said.