Jewellers to take 12-18 months to stabilise post GST: World Gold Council

Council wants govt to mark gold in the 6-7% taxation slab

Although the proposed GST roll-out from July 1 is poised to usher in a more transparent and uniform tax structure, the gold industry is likely to take an immediate hit and will take at least 12-18 months to recover.

A majority of the industry's trade falls under the unorganised sector with the organised segement accounting for only 30 per cent of the total gold trade. Consequently, experts believe that the industry might need some extra time to make the transition into the new GST regime.

"Behavioural change is necessary in both the consumer and traders. Moreover, the inherent complexity of the supply chain needs to be factored in during any such major transition. It will also depend on the final tax impact and regulations," said Somasundaram PR, managing director of India at the World Gold Council (WGC).

Despite having apprehensions about the disruptions in trade due to the new tax regime, Somasundaram said that GST will be "extremely good for the industry" as it would cut down on illegal trade of gold by ushering in a more transparent system. 

According to current estimates, around 120 tonnes of gold is smuggled into India every year.

At present, total tax on the yellow metal is between 12-13 per cent. This includes a customs duty charge of 10 per cent, excise duty charge of one per cent and a 1-1.5 per cent value added tax, depending on the state where business is located. According to Somasundaram, the Centre should mark gold in the 6-7 per cent taxation slab under GST. 

"In the GST regime, we demand the total tax burden on gold to be not more than 6-7 per cent but, we have to wait for a few days more when the GST rates on gold is expected to be announced," the official said.

WGC is of the view that the demand for gold will be flat in the second half of the year after the GST rates are announced. 

Demand in the January-March period increased by 15 per cent, while imports rose by 112 per cent, said Somasundaram. 

WGC projections further state that current trends are likely to change after GST as consumers would prefer buying lighter, minimally-designed jewellery.