MUMBAI -- A hike in taxes on gold sales in India could stoke under-the-counter buying and drive up appetite for precious metal smuggled into the country, where millions of people store big chunks of their wealth in bullion and jewelry.
As part of a new nationwide sales tax regime that kicked in on July 1, the goods and services tax on gold has jumped to 3 percent from 1.2 percent previously, with traders and buyers saying the move will likely force more transactions into the black market.
"Three percent is too much. I preferred to buy without receipts. The jeweler did not have any problem," said a middle-aged buyer, who declined to be identified after making purchases on Monday at the country's biggest bullion market, Zaveri Bazaar in Mumbai.
Smaller shops could be more inclined to sell without receipts, potentially hitting sales at big jewelers that keep to the rules, said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city Kolkata.
"Just to save 1 percent, some customers were earlier buying gold without receipts. With the 3-percent GST, now many more will be tempted to make unofficial purchases from small jewelers," Ajmera said.
The tax hike could also encourage more smuggling into the world's second biggest gold consumer, which buys almost all its bullion abroad. ...
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