The customs duty from gold imports could be approximately Rs 8,000 crore, about less than half of what was collected a year ago.
With the government giving a push to digital transactions following demonetisation and discouraging the purchase of assets using cash, some trends expected to change the gold business have been identified.
The immediate impact of demonetisation has been on gold demand, which went up sharply after the withdrawal of the 500- and 1000-rupee notes on November 8. While the demand for gold increased immediately after demonetisation, it fell sharply in December. Now for buying jewellery or bullion worth more than Rs 2 lakh, purchasers have to state their permanent account number.
''It would not be surprising to see the government stipulating that jewellery purchases of over Rs 20,000 should be supported by a government-authorised identification,” said an analyst who tracks Asian gold markets.
The import of gold in 2016 in tonnage terms has been the lowest since 2003, according to the GFMS TR. The organisation has estimated the official gold import in 2016 at 492 tonnes, a large part of that being for export.
The customs duty from gold import could be approximately Rs 8,000 crore, about less than half of what was collected a year ago. The low revenue also leaves room for cutting the import duty on gold to bring it in alignment with the proposed goods and services tax, whose rate could be 4-6 per cent.
At present the customs duty is 10 per cent and the excise duty is 12.5 per cent, but with input credit it is 1 per cent. All efforts to discourage gold import will be incomplete if jewellers don’t get local supplies, which is possible only if idle gold lying with Indian households is mobilised and for this the gold monetisation scheme is an ideal vehicle.
The government is pushing banks towards this end. However, 25,000 tonnes of gold lying with Indian households and Indian temples (the World Gold Council estimates gold with households at 24,000 tonnes) can come out if there is some assurance on questioning from the I-T department.
The government recently reiterated what a two-decade-old I-T circular said, which is if during I-T searches gold is found up to a certain limits prescribed, it cannot be seized, and if it is inherited there is no tax on it.
Experts say the government can clarify that if women inherit gold up to 500 gm, it can be considered as ‘stree dhan’ (women’s property). And if such inheritance can be supported by documents -- bills or will of gift, deed etc -- then such gold, when deposited under the GMS, no questions on the source will be asked.
There are still a few measures on which the government is working. The first is compulsory hallmarking of jewellery. The government now has the powers to penalise the holders of jewellery that is not hallmarked. However, early this month the government prescribed that only three standards will be followed and 14-, 18- and 22-carat jewellery could be hallmarked.
This year India will implement its own gold standards. This means gold refined by Indian refiners following prescribed standards will be accepted as valid tenderable gold in accordance with Indian standards on commodity exchanges and international markets.
At present the global benchmark for refined gold is the gold standard fixed by the London Bullion Market Association.
Photograph: Sergei Karpukhin/Reuters.