Context:
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India is the world’s second-biggest consumer of the metal.
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Gold import is likely to rise during the country’s peak holiday season as buyers try to avoid paying a new sales tax and to dodge new transparency rules
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Unaccounted sale will rise in the festive season as some customers are trying to buy without bills
Background information:
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In August, India moved to include gold sales under the Prevention of Money Laundering Act (PMLA).
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The law makes it mandatory for jewellers to keep records of customers’ personal identification numbers or tax code number for transactions above ₹50,000.
Key Fact:
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Indian gold demand typically rises in the last three months of the year as consumers buy more for the wedding season as well as for festivals such as Diwali and Dussehra.
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The World Gold Council estimate: India imported 120 tonnes of gold in 2016.
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In India, less than 4% of the people pay income tax. Many tax evaders choose to park their illicit wealth in gold as it is nearly as liquid as currency in the country.
What is happening?
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The sales tax on gold rose to 3% from 1.2 % as part of a new nationwide sales tax regime that started on July 1.
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Jewellers are buying smuggled gold at discount in cash, then making jewellery and selling it to consumers without receipts.