Mumbai:
Gold demand in India could be muted in the second half
of 2017, as the rollout of the new goods and services tax (GST) from
July is expected to dent appetite in the world’s second-biggest
consumer, the World Gold Council (WGC) said on Thursday.
But sales are likely to be robust during the first six months of the year, the WGC said.
Gold
consumption in the first quarter of 2017 rose 15% to 123.5 tonnes on
pent-up demand from jewellers as retail consumers ramped up purchases
for weddings, the WGC said in a report published on Thursday.
The
WGC kept its forecast for India’s full-year demand at 650 tonnes to 750
tonnes, lower than a 10-year average of 845 tonnes, but just above last
year’s level.
In 2016, gold demand fell 22% from a year earlier to 666.1 tonnes, the lowest in seven years.
"With
the implementation of GST, we are expecting some kind of disruption in
demand in the second half," Somasundaram PR, managing director of WGC’s
India operation, told Reuters referring to a Goods and Services Tax (GST) that will be implemented from July 1.
The
long-awaited GST is hailed as India’s biggest tax overhaul since
independence in 1947. The GST will replace a slew of federal and state
levies, transforming Asia’s third largest economy into a single market
for the first time.
But small jewellers, who account for nearly
two-thirds of the gold industry, could face operational issues in
transitioning to the GST, Somasundaram said.
Gold is a mainstay of Indian culture, serving as the primary vehicle for household saving for hundreds of millions of people.
The
government of Prime Minister Narendra Modi has tried to curb costly
bullion imports and put restrictions on cash transactions.
Indians buy more than two-thirds of gold with cash.
To
cut down unofficial trading, under the GST, gold should be taxed
substantially lower than the existing duty of 12%, Somasundaram said.
The
WGC has estimated that 100-120 tonnes of smuggled gold entered India in
2016. Smuggling has surged since New Delhi raised the import duty on
gold to 10% in 2013 to narrow a gaping current account deficit.
04 May 2017, 08:42 AM