InvestorQ : How can we summarize the key implications of the GST impost on gold?
Sam Eswaran made post

How can we summarize the key implications of the GST impost on gold?

swati Bakhda answered.
3 years ago

With the shift to GST, the unorganized sector will come under the purview of GST. Currently, the unorganized gold making sector is outside the purview of excise duty. That will be a big positive for the organized jewellery segment.

Currently just about 2000 jewellers are registered to pay excise whereas there are estimated to be around 2.5 lakh jewellers in India. When all these jewellers are brought into the GST fold, there will be a visible improvement in government revenues from gold GST.

There could be a perceptible shift in gold demand from physical gold towards products like sovereign gold bonds. Currently, sovereign gold bonds are exempt from GST and they also pay 2.5% interest. The chart below captures the gold demand in India over the last 8 years…

Even the World Gold Council (WGC) has hinted that the overall gold demand for gold has been faltering in India over the last 5 years. This GST will force more money to move towards non-physical assets like sovereign gold bonds rather than towards physical gold. This could also mean a greater thrust for the gold demonetization scheme, which had failed to take off when it was first launched in 2015. That is likely to be positive for the Indian economy overall.