The Gems and Jewellery Export Promotion Council has proposed changes in the revamped gold deposit scheme to make it more attractive, enable its larger acceptance and garner additional deposits of idle gold in the country. The council suggested changes to the Revamped - Gold Deposit Scheme (R-GDS) in a video conference with Tarun Bajaj, Secretary in the Department of Economic Affairs, recently, the GPEPC said.
The Revamped Gold Deposit Scheme, which was formulated to mobilise and productively use idle gold held by households and institutions (estimated to be over 24,000 tonnes), has not yielded the desired results, garnering deposits of only around 20 tonnes of gold, the Council said.
In an interview, GJEPC Chairman Colin Shah said that the R-GDS has not been highly successful because of a host of factors, including apprehensions from an income tax standpoint, trust deficit amongst various stakeholders, lack of geographical reach of banks, lack of commercial lucrativeness, a lock-in period, and penalty on premature withdrawal, among others.
The Council has proposed to link the R-GMS with the Income Tax Act which states that gold jewellery to the extent of 500 grams per married woman, 250 grams per unmarried woman and 100 grams per male member of a family need not be seized.
"GJEPC has suggested that limits specified under Central Board of Direct Taxes Circular should be revised, through the R-GDS Circular, to the extent of 1 kg for a married woman, 500 grams for an unmarried woman, and 200 grams for a male family member," Shah said.
If these limits are maintained under the GMS scheme, no GST or capital gains tax should be charged, he added.
The Council has also recommended that market tradable e-deposit certificates can be issued to the depositor having attributes like a unique certificate number accounted for digitally, under the R-GDS, in Demat format.
It said the certificate should have an in-built tracking mechanism, providing details of the original depositor, all subsequent holders, tenure of deposit and interest rate and mode, etc.
Moreover, GJEPC has suggested that the minimum threshold limit of 30 grams under the scheme be reduced to 10 grams and gold be accepted in fractions thereof.
It said the induction of a jeweller as a point of collection can help overcome trust deficit as regard depositors as also help the R-GDS penetrate in rural markets better, considering the geographical reach of jewellers.
The Council has proposed formal authorisation of jewellers as a point of collection and purity testing centres, as per terms commercially agreed with the affiliated bank.
The GJEPC chairman said while the changes proposed to the scheme will help unlock unused gold.
"By treating the gold deposit as part of the forex reserve, the scheme will help reduce gold imports, improve the sovereign rating, and arrest the rupee depreciation," Shah said.
He observed that high gold prices have impacted exports in a major way. Moreover, the lockdown has ceased all activities and impacted the logistics of the yellow metal.
"Gold jewellery exports have taken a major hit and plunged 73.62 per cent between April and July 2020 as compared to the same period last year. India's major export destinations such as the US, Middle East, Hong Kong, are now seeing a gradual resurgence in demand," the GJEPC said.
India's exports of gem and jewellery from April to July 2020 declined by 50.36 per cent to USD 4.11 billion as compared to USD 8.27 billion registered during the corresponding period of the previous year.
The labour-intensive sector contributes about 15 per cent of the country's overall exports.
The Revamped Gold Deposit Scheme (R-GDS) is a fixed deposit scheme for the yellow metal, with the objective of mobilising gold held by households and institutions in the country.
The scheme offers customers an opportunity to deposit their idle gold and earn interest on it.