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Budget 2022| Gold industry looks for bullion bank, tax-breaks on selling old gold and withdrawal of CTT

Nearly decade-long demand to increase the metal’s volumes in the futures market makes an appearance this time too.

January 31, 2022 / 02:31 PM IST
With designated bullion banks, industry stakeholders such as refiners and jewellers are put through a lot of inconvenience in banking.

With designated bullion banks, industry stakeholders such as refiners and jewellers are put through a lot of inconvenience in banking.

Setting up of a bullion bank, and tax breaks on income from the sale of old gold and on earnings from sovereign-gold bonds are some of the budget expectations from Augmont Gold For All.

Nearly ten-year-old demand from the industry, for the elimination of Commodity Transaction Tax (CTT), has also been included.  

Augmont Gold for All is an Indian refining-to-retail platform, which is NABL- and BIS-accredited and a member of the India Gold Delivery standard on NSE, BSE and MCX.

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,” said Renisha Chainani, head of research at Augmont. 

Read also: India's gold demand surges in 2021, jewellery purchases nearly double: World Gold Council


This makes banking inconvenient for stakeholders such as refiners and jewellers. For example, currently, if a jeweller wants to take a loan against his/her holding in the metal, he/she has to convert it into a rupee, make a deposit in a bank and take a loan against that. Or the jeweller/refiner will have to approach an international bullion bank for the same transaction. Instead, having a bullion bank would allow the jeweller to take a loan against the metal, making the process much easier.

“Therefore, bullion banks should be set up and these banks should be asked to maintain customer gold account in ‘quantity’ instead of ‘rupee’ account,” said Chainani. This would also help the government reduce its dependency on imports, she added. 

To make investing in metal-related financial products more attractive, Chainani suggested tax exemptions.

Currently, sovereign-gold bonds are seen as long-term investments because any redemption before the end of their five- or eight-year terms would invite tax. To draw more investors to this bond, she has suggested that no tax should be levied on withdrawal before the maturity period. 

Also, interest received on sovereign gold bonds should be made tax free. 

Old gold is often traded in the grey market to avoid taxes. Therefore to channel more of this into organised trade, capital-gains tax on the sale of old gold should be withdrawn, she said. This will also help the government to earn 3% GST on gold purchases and sales, she added. 

The demand for withdrawal of CTT has been around for a long time. It has been placed for this budget too. 

Read also: Which way is gold headed in 2022?

The hope is that the withdrawal will increase the volumes in the futures market. Currently, people do a lot of dabba trading, said Renisha, in an interview with Moneycontrol. This is when two traders meet and execute a sale outside of the stock exchange, usually to avoid taxes. 

“(CTT) should be reduced to zero as there is no fixed margin in bullion trade due to its international pricing mechanism,” she said.

Here are the other expectations:

*IGST rate on job-work charges 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.

*IGST input for sales of bullion made without the physical movement of goods should be permitted.

*The GST rate on making handcrafted jewellery should be reduced to zero.

*It is essential that tax-deducted at source (TDS) on the movement of bullion and tax-collected at source (TCS) on sale of bullion is reduced from 0.1% to 0.01% so that working capital is not blocked. 

*The gems and jewellery sector should be exempted from the E-way Bill requirements, as it is important to recognise that there is a security threat to the life of the carrier.

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