Taxes On Gold Needs An Urgent Relook

Gold! It stirs many an emotion in an Indian family's mind. When gold demand picks up, the economics makes the policymaker's plan shine. The joy that jewellery gives to women can be inexplicable for many.

The comfort of revenues that taxes on gold can give to the policymakers can, similarly, be inexplicable. Adding more jewellery makes perfect sense for the family. Multiplying revenues from taxes on gold does the same for those who make policy.

Over the years, the government policy has sought to balance the sometimes-antagonistic demands of emotion and economics.

Unfortunately, the two just do not seem to add up. With taxes that are incentivising the grey market and weak enforcement to check it, India could be missing the woods for the trees. Industry estimates suggest that in different parts of the country, 70 to 80 percent of gold demand is met through the grey market.

The grey market could include financiers, trade channels and jewellers, for who higher import duty on gold is an arbitrage opportunity. If she chooses to address the issue of grey market for gold, the beneficiaries could be an unlikely ensemble for Finance Minister Nirmala Sitharaman.

"If the economics around gold can be simpler, our black money worries of the country can be addressed to a large extent," M PAhammed, Chairman, Malabar Group of Companies which runs 280 jewellery stores in India and abroad, said.

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