India gold demand to remain at 650-750 tonnes in 2017

Kochi: The gold demand in India will remain in the range of 650 to 750 tonnes in 2017 even if the GST rates are fixed at a lower rate, according to World Gold Council, India.

The gold demand stood at 674 tonnes in 2016.

"Despite the first quarter showing 15% growth and the second quarter promising to be good because of good Akshaya Trithiya sales, we feel that industry will take 12 to 18 months to adjust to the new GST rates. Consequently, the demand may be more or less at last year’s level," said Somasundaram PR, MD of WGC India.

The time taken for such adjustment may not be much in the southern India, which account for 40% of the gold demand in the country, as organised trade is the mainstay in the region unlike in other parts of the country. The share of organised players in the gold trade in the country has gone up from 5 to 30% in the last ten years.

The current tax on gold is around 12 % which includes customs duty, excise duty and VAT. The council is of the opinion that the GST rate should be below that as it will bring about a behavioural change among the consumers.

Though Kerala has recommended for 5% GST on gold, the other states may have a different view. `` We don’t know what rate will be charged if we exchange old gold for new one. Will it be 18% service charge or the GST. A low GST rate will bring down the prices. But if it is pegged high, then the industry may take more time to adjust to it,’’ he said.

WGC is hoping the government will formulate a comprehensive gold policy with the GST in place to promote gold as a saving product through banks. China, the largest consumer of gold has implemented it with success, Somasundaram said. Nil duty for gold ETFs can encourage more flow of gold into the dematerialised form, he added.

Somasundaram was in Kerala to introduce the Malayalam version of its report titled 'India's Gold Market: Evolution and Innovation'.