How will 2022 fare for Bullion Industry

With Budget round the corner, let us understand what are expectations of Bullion Industry from the Union Budget 2022:

  1. Currently, there are no designated bullion banks in the country. The entire business transaction of the gold industry with the bank needs to be done through the bullion bank. Therefore, Bullion banks should be set up and these banks should be asked to maintain customer gold accounts in “Quantity” instead of “Rupee” account. This would help the government to reduce dependency on imports.
  2. Presently huge quantities of domestic gold are lying idle in bank lockers. Banks should be permitted to open gold metal accounts.
    • It can be deposited with the banks for GMS
    • It can be pledged with NBFCs etc for gold loans.
    • It can be sold at the spot exchange as and when cash is needed.
    • It can be transferred to a jewellers account, in order to purchase new jewellery for wedding, gifting etc. Idle gold from lockers, households etc. will get converted to good delivery gold bars.
  3. Banks should be allowed to buy bullion from refiners. Domestic gold refineries have 1500 tonnes of production capacity, with hardly 30-40% capacity utilisation. Still banks are importing gold from gold refineries abroad, due to lack of permission from Govt / RBI.
  4. The capital gains tax on the sale of old gold should be withdrawn from currently 20%.  This will channel more old gold into the organised trade through jewellery shops and gold refineries, enabling the govt. to earn 3% GST revenue on gold purchased / sale as well.
  5. To make the Sovereign gold bond scheme more attractive, it is suggested that interest received on Sovereign gold bond is made tax free and no tax is levied on withdrawal before redemption of the bond at maturity period.
  6. Gold bullion is sold at international price and not at cost + profit. Hence, margin on bullion trading is 0.03% whereas TDS and TCS on bullion is 0.1%. TDS on movement of bullion and TCS on sale of bullion must be reduced from 0.1% to 0.01% so that working capital of Bullion Traders is not blocked.
  7. GST rate on making handcrafted jewellery should be reduced to zero from 12% currently. The gold jewellery is always manufactured mostly through combination of hand and mechanised methodology. This will encourage more skill in manufacturing hand crafted jewellery and bring in lot of employment apart from preserving our age- old mechanism of making ancestorial & heritage jewellery.
  8. IGST rate on job-work charges for making Gold Jewellery should be reduced from the current 18% for B2C and 5% for B2B transactions to 3%, at par with the IGST rate on the sale of gold jewellery.
  9. CTT should be reduced to zero from 0.01% as there is no fixed margin in bullion trade due to its international pricing mechanism. This will reduce dabba trading which is illegally operated by some unregulated players.

You may also like to read: Will Gold behave better in 2022?

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