The government’s proposal to increase the GST on gold jewelry from three percent to five percent is expected to derail the rebounding industry after a series of disruptions, including Covid-induced closures shutting down retail stores and punching compulsory putting jewelers in awe.
After being at its lowest for a long time, jewelry sales have picked up in the past two months, with falling gold prices boosting wedding purchases and pent-up demand.
Spoken in the wheel
Tanya Rastogi, director of the Indian Bullion Jewelers Association, said the move to increase the GST rate, if implemented, will encourage the black economy and hinder the recovery of a long-suffering industry. . As it stands, India is one of the most expensive places to buy gold and the proposed tariff hike will make it even more expensive, she said.
Shrey Mehta, director of Pooja Diamonds, said the move will certainly encourage unorganized gold trading and impact organized retailers who follow grassroots government standards.
The jewelry industry is already undergoing a lot of transformations with policies like Hallmark’s unique ID and will now be plagued by the GST hike, Mehta said.
Demand for jewelry in the September quarter increased 58% to 96 tonnes (61 tonnes), supported by lower prices and pent-up purchases, according to data from the World Gold Council.
Jewelers were well prepared for a sudden surge in demand, as gold imports in the last three quarters of this year were much higher at 691 tonnes compared to the demand of 360 tonnes recorded during the same period.
After hovering around 46,200 to 46,600 yen per 10 grams last month, gold prices started to rise and hit 48,834 yen on Monday.
Illegal trade can flourish
Vaibhav Saraf, director of Aisshpra Gems and Jewels, said short-term gold price stability would not offset rising GST rates as the value of the yellow metal is expected to rise given the uncertainty. national and global economy.
The tariff hike will lead to an increase in the black marketing of gold and ultimately spur gold smuggling, he said.
Aditya Pethe, director of WHP Jewelers, said the tax on gold should not be increased because it is used not only for ornamental purposes, but also as a form of savings to create assets.
The move will encourage consumers to buy gold jewelry from unreliable sources without a proper invoice and make them vulnerable to scams, he added.