EGR can help reduce India’s gold import dependence, but there is one speedbump

It was in 2022 that the Securities and Exchange Board of India issued a circular that paved the way for Electronic Gold Receipts (EGRs). The BSE launched EGRs the same year. But, over four years later, there have been limited takers for it, even as investment demand in the country has surged. Gold industry is now hopeful that issues related to GST (Goods and Services Tax), the one speed bump that has held back its success, will be addressed soon and that should help EGRs gain acceptance and unlock the tonnes of gold lying idle with Indian households.
 
What are EGRs?

As the name suggests, an EGR is basically gold held in electronic dematerialised form. Lets say, you have 10 or 100 gram of gold held in physical form. You can get this converted into an EGR through a SEBI-registered vault. If all the required conditions are met, you get a digital certificate in your demat account and the underlying gold is stored in secured vaults. This EGR can now be traded just like shares on an exchange.
You could even lend the EGR gold to a jeweller and earn regular interest on it. And when required the EGR can be converted back into physical gold by placing a withdrawal request to the vault manager.
While BSE launched EGRs in October 2022, NSE introduced it in May 2026.
 
GST a Speedbump?

One issue that has held back EGRs from taking off in India is related to GST. When you buy physical gold you pay a 3% GST. Converting into an EGR or trading of EGR doesn’t incur any GST. However, converting the EGR back into physical gold once again incurs 3% GST.  Generally, traders or jewellers typically claim input tax credit (ITC), basically they will recover the GST they were charged to buy gold by setting it off against the GST on their sales.      

However, once you convert physical gold into an EGR, it then becomes a security and therefore no ITC is available. Moreover, retail investors as such do not have any option of claiming ITC on GST.

The jewellery industry is hopeful the issue would be addressed by the GST Council soon.

“We have held discussions with RBI, SEBI. We met the commerce ministry also. They have assured us that the GST issues will be addressed. GST is the only issue and hopefully that will be taken up in the next meeting (of the GST council),” Prithviraj Kothari, the president of India Bullion and Jewellers Association (IBJA) said on Wednesday.

Industry officials call for a small tweak, where the gold will be continued to be treated as a commodity when transferred into an EGR. This move will help registered dealers take the GST back. Given that conversion of the EGR back to physical gold will anyways attract a 3% GST, there won’t be any loss to the government, they point.

However, for unregistered users and retail investors, there is no such GST benefit. So, if you bought physical gold, you would have paid a 3% GST and then when you convert the EGR back again to physical gold, there will again be a 3% GST.

On Wednesday, the NSE and Augmont entered into a tie-up, to boost the adoption of EGRs. As a part of the tie-up, Augmont will deploy its comprehensive ecosystem for EGR creation, redemption, liquidity provision, delivery and price discovery. It will bring together its more than 42 million registered users, a network of over 4,975 jewellers on the spot market, 4,600 retail touchpoints and over 80 Gold for All stores and API integrations with stockbrokers and financial service providers.
 
EGRs and their potential importance in import reduction 

India consumes around 700-800 tonnes of gold on average each year. Much of this is imported. This even as Indian households are estimated to hold around 30,000-35,000 tonnes of physical gold, much of which has remained economically idle, according to officials.

As gold prices surged last year, India’s gold imports touched $71.98 billion, accounting for over 9% of the total import bill. By channelling gold to manufacturers via the securities lending and borrowing mechanism, EGRs can reduce India’s dependence on imported gold, which will also reduce the pressure on the current account deficit, officials point.

Gold for long been considered precious by Indians. In the last few years, investment demand for gold has also surged. As of June 30, 2026, Gold ETFs alone accounted for over Rs 1.70 lakh crore in assets under management. Officials point many Indians also buy gold in the form of bars and coin, apart from jewellery and are hopeful EGRs can also be successful in the coming years.

“EGR creates an ecosystem that is efficient, credible and scalable. Even if a small fraction of the gold lying in our homes enters a transparent and regulated ecosystem, it can improve liquidity, formalization, and reduce our dependence on imports. Instead of simply buying more gold, India can begin making better use of the gold it already owns,” said Kothari.

According to Ketan Kothari, whole-time director of Augmont Enterprises, EGRs bring together everything that an Indian customer would aspire to have in a gold product – convenience, best price discovery, a fully regulated framework under SEBI, ability to take delivery of even small quantities, safety and potential for higher returns.