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That should mean a continued lack of gold supply here. With the drop in output coming as bullion demand is reportedly ramping up in one of the world’s major markets — where new policies are continuing to re-shape the face of the gold market.
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Local press reported that gold buying in India has seen a major spike the last few weeks. After the government decided earlier this month to adopt a new 3% sales tax on bullion.
That new tax is going to make gold buying more expensive in India going forward. With the new rate scheduled to take effect on July 1.
With that deadline looming, buyers have reportedly been scrambling to pick up supplies now, before the new tax rates become effective. So much so that many Indian jewellers are reporting sales of gold for wedding gifts being made now — despite the fact that wedding season doesn’t begin until winter.
Tax rates on gold after this month are actually likely to rise even further than the posted 3% sales tax rate. Because of an additional levy being placed on the gold jewelry manufacturing sector.
Officials said this week they will impose a 5% goods and services tax on the “making” of gold products. Payable by jewellers, who will presumably pass the charges along in pricing to end consumers.
The 5% rate for the manufacturing tax is actually a win for India’s gold-makers. With the government earlier planning to charge an 18% tax — but then backing off to the 5% mark after meetings over the weekend.
But even at that lower rate, the total increase in taxes for India’s gold buyers is going to be significant. Watch for stats on buying after July 1 to see the effects on demand in this critical market.
Here’s to being taxing,
Article by Pierce Points