India’s Gold Monetisation Scheme sparks criticism over income tax

By

Barbara Santamaria

Published
Feb 24, 2016

The Vice President of India Bullion and Jewellery Assocciation (IBJA), Saurabh Gadgil, has recently asked the Indian government to increase excise tax exemptions for people who invest in the country’s new Gold Monetisation Scheme.

Indians are amongst the largest consumers of gold in the world, however their precious metal is usually kept unused and loses its monetary value. To unlock the country’s massive stash of gold, Prime Minister Shri Narendra Modi launched a scheme in November 2015 aimed at transferring an estimated 20,000 tonnes of gold kept in households and institutions to the banking system.

Although the scheme is promised to reduce gold imports, increase liquidity in the market and boost the economy, Indians have been reluctant to deposit their jewellery, bars and coins in banks due to concerns over income taxes.

In an interview with ETRetail, Saurabh Gadgil said that the government’s upcoming budget should increase excise duty exemptions from Rs 1.5 crore to Rs 5 crore to encourage small scale manufacturing.

"Based on its potential growth and value addition, the government has declared the gems and jewellery sector as a focus area for export promotion. The government has recently undertaken various measures to promote investments and to upgrade technology and skills to promote 'Brand India' in the international market…The industry is projected to generate up to US$ 35 billion of revenue from exports in 2015," he told the newspaper.

Under the current Gold Monetisation Scheme, Indians are encouraged to deposit their gold with banks so it can be refined. The consumer earns an interest and can get the gold back in the form of bars at the end of the term.