With GST on gold capped at 3%, the industry is set to become more transparent and organized, while the tax will certainly mean a higher cost for customers anyway between 13.5%-14%. (considering the 18% rate for gold making). Before the slated roll-out of GST on a nation-wide basis, WGC reiterated that the GST, the biggest reform in the India's financial system shall play good for the gold industry with more demand forecast by the year 2020 to 950 tones.
The Council is of the view that the GST shall foster a positive economic outlook which shall boost the sentiment for demand in the precious yellow metal. With respect to the supply chain, the players shall become more organized and transparency shall be witnessed with the effective roll-out of GST.
The lower tax rate has been embraced by small retailers who now aim at better management with a higher degree of compliance. As otherwise a higher tax rate of 5% or more, would imply that players could have resorted to ways to skip the ambit of GST by unscrupulous ways.
The gold industry with its major share of small retailers comprises 30% of the large players in the highly fragmented industry landscape.
The report by the World Gold Council also added ""It is likely that GST will accelerate the pace of consolidation. Firms that currently outsource manufacturing services from artisans and incur the 18 per cent GST rate may look to develop in-house capabilities. Small jewellery shops, which may have illegally benefited by not paying tax will lose that advantage, and large retailers can compete on a level playing field".
The stock market embraced the announced of low tax rates under GST on gold with high upsurge of 6% the next day after the announcement was made.