'GST rate may not affect gold demand'

'GST rate may not affect gold demand'
Demand for gold jewellery is unlikely to be affected due to GST rate of 3%, according to rating agency Icra.

“Against the cumulative current tax rate of 2%, the final GST rate at 3% is higher, while the import duty will continue at prevalent rates. Icra expects the same to be passed on to end-customers and the higher tax is not likely to cause any major disruption to the gold jewellery demand,” Icra states.

Organised retailers are expected to benefit at the cost of unorganised players as the overall supply chain is likely to be streamlined with the scheduled rollout of GST, Icra adds.

The Centre has announced a 3% tax on gold jewellery, in line with the 2-6% rates indicated earlier in the draft GST rules. Under the present tax regime, jewellery retailers are levied a VAT of around 1% in most states (except Kerala, where 5% VAT is levied) on sales and an excise duty of 1% is levied on the input side (without tax credit). This apart, a duty of 10% is levied on bullion imports and 15% on jewellery imports.

“Gold jewellery demand is expected to be favourable over the near-term with an uptick in both rural and urban demand. Rural consumption will benefit from favourable monsoon guidance, likely rise in minimum support prices, rural employment guarantee scheme and waiver of farm loans in few states,” Icra VP and Co-head (Corporate Ratings) K Srikumar said.

Meanwhile, jewellery stocks zoomed by up to 17% on Monday, following the GST Council’s decision to tax gold and gold jewellery at 3%. Shares of Titan Company shot up by 16.97%, PC Jeweller surged 9.38% and Tribhovandas Bhimji Zaveri gained 5.43% on the BSE.

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