Black gold: Tax hike under GST could boost illegal bullion, jewellery sales

Rising taxes on gold sales in India could fuel subcontracted purchases and generate appetite for precious metals smuggled into the country, where millions of people store Large pieces of their wealth in ingots and jewelry.

As part of a new national sales tax system that began on July 1, the Goods and Services Tax (GST) on gold has surged By 3% from 1.2% before, traders and buyers saying the move is likely to force further black market transactions.

"Three percent are too much." I preferred to buy without receipt. "The jeweler had no problem," said a middle – aged buyer, Be identified after making purchases Monday on the country's largest ingot market, Zaveri Bazaar in Mumbai.

Smaller stores might be more inclined to sell without receipts, which could hit sales to the big jewelers who abide by the rules, said Harshad Ajmera, owner of JJ Gold House, a wholesaler in the city. 39 is from India, Kolkata.

"Just to save 1 percent, some customers were buying gold earlier with no receipts. With the 3 percent GST, many will be tempted to make unofficial purchases from small Jewelers, "Ajmera said.

Rising taxes could also encourage greater smuggling in the world 's second largest consumer of gold, which buys almost all of its ingots from abroad.

Gold smuggling has been common since India increased import duties on metal to 10 percent in a series of increases in August 2013, seeking to curb demand To reduce a current account deficit.

The World Gold Council estimates that smuggling networks matter up to 120 tons of gold in India in 2016.

"The GST rate has caused more incentives to smuggle gold. The government should reduce import duties and make smuggling unbearable," said Aditya Pethe, director at Waman Hari Pethe Jewelers in Mumbai.

Legal imports of the country generally represent about 800 tons a year, with the metal used in everything from investment to religious gifts and wedding gifts.

"A lower import duty would increase legal imports and, ultimately, legal sales. Tax revenues would increase rather than fall," said Daman Prakash Rathod, director of wholesaler MNC Bullion in the Chennai's southern city.

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