Experts call for lowering taxes to help make gold recycling attractive

Over the past year, even as gold prices hit record highs, demand for gold remained strong. As India is dependent on imports for much of its gold requirements, rising demand means more imports and that puts pressure on the currency and on the country's current account.

India's households are estimated to be holding more than 32,000 tonnes of gold according to recent studies. Therefore, there is a viewpoint that recycling more of it could reduce our dependence on imports.

However, even as gold recycling companies are on the rise, and jewellers push gold exchange schemes in a big way, there could be a lot that could be done to get the old gold lying locked up in lockers in to the market.

The government recently raised import duties on gold hoping it will curb demand. But experts point that this as such may not help in reducing consumer demand.

"Even when gold prices touched Rs 1,75,000 per 10 gram, there was no dip really in consumption. So, why will there be a dip now at around Rs 1,50,000-1,60,000," wondered Ajay Mehra, MD, Mehrasons Jewellers.

He feels raising import duties could incentivise jewellery sales in markets like Dubai. He points that 60 per cent of handmade jewellery exported from Dubai is classified as Indian jewellery. Mehra therefore feels the import duty should be actually cut to zero.

"Give the industry an opportunity to perform at a level playing field to the international level. And you might see a huge turnaround," said Mehra.

He was speaking during a session 'Green Gold' at BT India's Most Sustainable Companies Summit and Awards.

So, if demand is going to be strong, how do you incentivise people in monetising their idle gold?
Experts say the solution could lie in reducing Goods and Services Tax.

"You buy gold there is 3 per cent GST. To sell gold also there is a 3 per cent GST. People may not want to part with ancestral jewellery. But there are lot of bars and coins that can be sold. One thing that stops them from selling it is this GST element," pointed Keyur Shah, the CEO of Muthoot Exim, the precious metals business of Muthoot Pappachan Group.

Shah believes slashing this GST on sale of gold could open the door for more gold recycling.

Experts also say reducing capital gains on sale of gold could help.

"For some time, let's just remove capital gains tax on gold. There could be a moratorium period. This will open the door for people to come out with their gold," said Shah.

As the prices surged over the past year, gold investing also gained a lot of traction with investors pouring in money gold exchange traded funds (ETF) and gold mutual funds.

Sugandha Sachdeva, Founder, SS WealthStreet says investors could hold 5 per cent of their wealth generating portfolio in gold funds.

She also bats in favour of Electronic Gold Receipts. In India, EGRs are a fairly new concept.

The National Stock Exchange only in May began live trading in EGRs. They are dematerialised securities that represent ownership of physical gold. The underlying gold is stored in accredited vaults and held electronically through depositories, The electronic receipts can be traded on exchanges.

"I would like to create awareness about that product, which integrates the physical market with the formal financial markets," said Sachdeva.

Gold prices surged around 70 per cent in 2025. Can they go up further?

Shah says prices will always go up in the long-run given the demand. He believes if the trends over the last decade are anything to go by, prices will double in the next five years.

Sachdeva believes, prices could top Rs 2 lakh in two years. Mehra also sees prices going up over time.