The Hindu Business Line : Bullion trade calls for uniform tax structure — Allow banks, MFs, FIIs to trade in futures: GFMS chief

Mr Paul Walker, CEO, GFMS Ltd, addressing the Indian International Gold Convention in Mumbai on Wednesday as Mr Chris Kenny, Director, Global Markets, Rand Refinery Ltd, looks on. — Paul Noronha

Mumbai , Aug. 24

THE Bombay Bullion Association (BBA) has called for a uniform taxation structure for gold trade across the country. Speaking at the India International Gold Convention 2005, Mr Mukul Sonawala, President, BBA, said even when the Government had recently announced one per cent levy across the country, the Delhi Government announced the restructuring of sales tax levy to compete with and bring back the bullion business which it had lost to neighbouring States such as Rajasthan and Gujarat.

The Delhi Government said it would impose 0.25 per cent levy. The Maharashtra Government has already implemented the Value-Added Tax (VAT) and therefore, has a relatively high one per cent tax on gold.

Dr Paul Walker, Chief Executive Officer of GFMS Ltd, in his address, said gold prices were expected to move up in the long-term as more and more strategic investors from US and Europe are starting to hedge against dollar by the way of investing in gold.

The Indian Government should integrate the commodity market infrastructure with financial systems by allowing commercial banks, mutual funds and Foreign Institutional Investors (FIIs) to trade in futures trading, Mr Walker said.

The average gold price moved up to $427 a tonne during January-July 2005 from an average of $409 a tonne during the same period in 2004 , Mr Bhargav Vaidya, a bullion analyst said.He said India had the largest household gold portfolio of about 21,000 tonnes valued at Rs 13,02,000 crore which can be channellised into the trade. With the vast gold reserves, India can emerge as a major bullion-trading hub.

He suggested that gold exports should be permitted and taxes on bullion should be removed.On the importance of the electronic trading, Mr Ketan Kothari, Director, Riddhi Siddhi Bullions Ltd, said: "An arbitrage opportunity is available when you buy from the spot market and sell on the MCX or buy on MCX when gold is available at lower cost than bank costing."

He also said: "If gold loans are available at a lower cost than the returns on fixed deposits, traders can avail themselves of the loan, sell in the gold market, invest the funds in FD and at maturity of loan return the gold to the bank by purchasing MCX futures."

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