Apprehension of high GST forces jewelers to bring all gold stock on books
Jewellers saw robust gold demand this Akshaya Tritiya because prices were low and on account of profit-booking in equities. The underlying demand trend was strong after it stayed weak last year.
Sudheesh Nambiath, senior analyst, precious metals, South Asia, GFMS Thomson Reuters, said: “Compared to last year’s 17 tonnes, our estimate is that this year demand for gold on Akshaya Tritiya on April 28 more than doubled and would be in the range of 35-40 tonnes.”
In 2015, 31 tonnes of gold was sold. While the estimate for 2014 is not available, the gold demand was the lowest that year because of stringent import restrictions.
In 2013, Akshaya Tritiya was in May, when huge imports had taken place. In April that year, 133 tonnes were imported and, in May it was 161 tonnes, and this forced the RBI to put restrictions on gold import.
This year’s demand is considered the highest after 2013, according to a bullion analyst.
Jewellers have been sitting on a high inventory, which they are forced to show on their books. “The apprehension is that the goods and services tax on gold will be higher than one per cent. Hence the stocks are being brought on their books before the GST is implemented,” said an industry veteran.
There are other reasons for the high demand. Last year the demand was low because the jewellery market was facing regulatory issues like the imposition of the excise duty on jewellery, and the order on providing the PAN for purchases worth more than Rs 2 lakh. Hence jewellers having inventories offered discounts.
Things did not become normal after the six-week strike against the excise duty, and a new mechanism was not in place. Hence the overall negative mood had kept customers away from the market.
A person associated with a gold policy advisory body said part of the profits booked in equities, which are at an all-time high, went into gold buying. Several customers have bought gold for weddings now, though the wedding season is yet not over.