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Struggling to adapt: GST could dampen gold demand in short-term, says WGC

Two-thirds of India's gold demand comes from rural areas, where jewellery is a traditional store of

Reuters  |  Mumbai 

GST could dampen India gold demand in short-term - WGC

A hike in taxes on sales in India could pressure short-term demand from the world's No. 2 consumer of the precious metal, the World Council (WGC) said in a report.
Faltering appetite in a country where is used in everything, from investment to wedding gifts, could drag further on global prices, already trading near their lowest level in 7-weeks.

"In the short-term at least, we believe (the tax) may pose challenges for the industry. Small-scale artisans and retailers with varying degrees of tax compliance may struggle to adapt," the said in a report published on Thursday.
As part of a new nationwide sales tax regime that kicked in on July 1, the Goods and Services Tax (GST) on has jumped to 3 percent from 1.2 percent previously.
There have been fears the tax increase could stoke under-the-counter buying and drive up an appetite for precious metal smuggled into India, where millions of people store chunks of their wealth in bullion and
Meanwhile, the also said a government move to ban cash transactions over Rs 200,000 from April 1 could hurt demand in where farmers often purchase the metal using cash due to limited access to cheques and electronic payment systems.
Two-thirds of India's demand comes from rural areas, where is a traditional store of wealth.
"The transactions rule potential impact isn't entirely clear: it could curb purchases; it could encourage shoppers to buy smaller amounts of spread over more transactions; or it could push a large part of demand underground and encourage a black market in gold," said the
The group kept its demand estimate for India at 650 to 750 tonnes for 2017, well below average annual demand of 846 tonnes in the past five years.
In the long-term, the will have a positive effect on the industry by making the sector more transparent and improving the supply chain, the added.

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