In 2015, the Indian government floated the idea of setting up a national gold exchange
Chennai: Efforts to set up a Spot gold exchange, which was mooted in 2015 to provide a single spot gold rate for the entire country, have been stalled due to the concerns over a possible double taxation of Electronic Gold Receipts.
In 2015, the Indian government floated the idea of setting up a national gold exchange. Later in 2021, the Securities and Exchange Board of India (SEBI) had approved a framework to facilitate spot trading of the yellow metal in India after the Budget entrusted it with the task.
The exchange will enable the trading of gold through an instrument called an Electronic Gold Receipt (EGR) and EGR represents the physical gold stored in registered vaults. One EGR is equal to one gram of physical gold. The trading, clearing, and settlement characteristics of EGRs will be comparable to other securities, such as stocks.
However, the taxation on EGRs has been a concern for the industry. According to industry sources, as per the current proposal, GST rates will be applicable on every transaction of the EGRs. The industry wants GST to be applicable on EGRs only at the time of redemption.
The GST Council has to take a decision on the double taxation. Once the taxation issue is resolved, Spot Gold Exchange can come into effect.
The exchange can enable formalisation of the Indian gold market which in turn would improve transparency and tax compliance along with ensuring efficient price discovery. Currently, every city has a different spot gold price, which leaves the consumers confused.
With spot gold exchange, India will join the league of countries like the UK, China and Turkey with spot gold exchanges.
