China has given a big shock to the world regarding gold, which will also affect the Chinese people. This rule is coming into effect from today, November 1. China has suddenly decided to end tax exemption (VAT exemption) on the sale of gold, which could increase costs to consumers and deal a major blow to the world’s largest bullion market.
According to a Bloomberg report, China’s Finance Ministry has announced that from November 1, gold retailers will not be allowed to recover VAT on the sale of gold purchased from the Shanghai Gold Exchange. Simply put, any sale of gold purchased from the Shanghai exchange will not be taxed. This rule applies to all types of gold, whether sold directly or processed into jewellery, coins, high-purity bars or industrial materials. This represents a major change in taxation.
The decision by China’s Finance Ministry to remove VAT exemption on gold has been taken at a time when the Chinese economy is sluggish. Real estate and manufacturing sectors are not experiencing growth like before. China is looking for new opportunities for economic development. China has taken this decision in this regard. Removing VAT exemption could increase government revenue. However, this situation will result in higher rates for customers buying gold in China.
What will be the impact on gold prices in India?
China is one of the world’s largest consumers of gold. There, changes in prices or demand have a direct impact on the global market, which impacts the Indian market. Experts believe that this rule of China is likely to increase the prices in gold markets around the world including India. Although the global gold price is hovering around US$4,000 an ounce, some predict it could reach US$5,000 within a year.
It is noteworthy that last month, due to increase in demand, gold had reached a record high. However, gold prices fell sharply due to profit-booking and fell by almost ₹12,000 to ₹1.20 lakh per 10 grams on MCX. However, it saw a slight rise on Friday.