Bengaluru: Soaring gold price ups illegal trade; legit sales drop

Gold price touched an all-time high at Rs 35,700 per 10gm on Tuesday, before tapering down to Rs 35,000 the next day. It hovered around Rs 35,100 on Thursday.

With prices expected go further north due to global factors and touch Rs 37,000 in the near future, traders are urging the government to reduce customs duty on gold from 10% to 5% as a contingency measure, besides taking some long-term steps.

“The situation is similar to what we had witnessed during demonetisation and early days of the GST regime. If the government fails to take immediate measures, we will be in further distress,” said Nitin Khandelwal, immediate past chairman of All-India Gem and Jewellery Domestic Council. Gold jewellery attracts 3% GST apart from 10% customs duty, and the tax burden is considered huge given the commodity’s value.

S Venkatesh Babu, president of Bengaluru Jewellers Association, said: “A lot of unaccounted gold is being sold, because of which percentage of legitimate trade is going down. We started getting reports earlier this month that sales at the outlets were down by 40% and dipped to even 60% when the prices peaked a couple of days ago.”

According to the association, there are about 8,000 jewellery outlets in Bengaluru that cumulatively sell around 400kg of gold daily, 15% of which comes from people selling gold to traders. Babu said while the gold sold has gone up to about 30%, sales at outlets have plummeted.

He predicted a further fall in business in the coming days as the price spiral will be coupled with the Ashada month, considered inauspicious to buy gold, which starts next week.

Alarmingly, the quantity of smuggled gold sold in the black market has gone up drastically. While around 16 tonnes of non-duty paid gold are sold in a month across India, around 25 tonnes were sold between June 1 and 26.

“This will also eat into the government’s revenues. Reduction of the tax burden would not only encourage people to go in for legitimate gold trading but also result in better compliance,” said BT Manohar, chairman of the taxation committee at Federation of Karnataka Chambers of Commerce and Industries.

The long-term measures demanded by traders include abolition of 2% charge on debit and credit card payment and enabling of transaction methods like RTGS and NEFT 24×7.

“If you want to encourage cashless economy, which can be an effective solution to black economy, you need to incentivise electronic payment and not charge them,” said Khandelwal.

Courtesy: Times Of India