Tuesday, May 18, 2010

How much did the Government lose on Akshaya Thrithiya day

Purchasing gold on Akshaya thrithiya in India is considered to be very auspicious. It is a belief among Indian consumers that by investing on some form of gold on this day brings prosperity and the gold keeps multiplying year on year. It is quite a strange belief and the jewellers can bank on this Indian sentiment and lure so many women who are virtually the custodians of all gold in every household to buy jewellery of some form or the other. Most Indian women prepare for this day much in advance and keep a substantial amount as savings for investment on this day. Besides the jewellery showrooms, the banks have also started selling gold coins and gold biscuits in various sizes and denominations to entice customers to invest in pure gold. Most shops were open early in the morning to cater to the rush in sales and many showrooms were jampacked with customers buying their favorite ornaments like necklaces, ear-rings, finger and nose rings studded with various stones.
Last year Akshaya thrithiya sales were almost 45 tonnes of gold. In 2010 many jewellers are upbeat that the sales were expected to grow by atleast 15% this year. They have also stocked gold inventory in excess of 15 to 20percent inspite of the rising prices in gold. Standard gold (99.5 purity) closed at Rs 1,821.50 a gm and pure gold (99.9 purity) closed at Rs 1,830.50 a gm in the Mumbai bullion market on Saturday.

A host of promotional offers announced by some of the retail majors such as Tribhovandas Bhimji Zaveri, Tanishq, Reliance Jewellery, GRT, Khazana and Lalitha Jewellery may tempt a few buyers to brave the sharp rise in gold prices in the last few days. Akshaya Tritya will reinforce that gold still remains a preferred option for investment by the common man, sources say.  “This year with the economy booming and all industries doing well, we are confident that consumers will stock up gold as an investment for Akshaya Tritya despite the higher prices since the yellow metal is expected to either stabilise at this level or even rise further,” says Mr Vinod Hayagriv, Chairman, All India Gems and Jewellery Trade Federation

Now for the most interesting part on this article. Did the jeweller issue a receipt to all those consumers who purchased gold on this auspicious day. Most innocent and ignorant women customers might say yes. Some might have also said no need for the bill as they must have been purchasing jewelley from their trusted showrooms since years, some of them even to the next generation. Then since this day is so good to convert some of the black money into white few cash rich customers might have invested in enormous amounts on gold paying in cash and not asking for a receipt.
For majority of those customers who actually got a receipt, upon careful examination they will find it is just an estimate memo written on a cheap letter head with no sales tax and VAT numbers which is a clear attempt to evade sales and income tax.
Some of the showrooms also vehemently displayed "INSIST ON BILL" and "VAT 1%" but they seldom follow this procedure. Some of the top showrooms might have been following the procedures but in India most of the jewellery purchased are by women and they are quite price sensitive and rarely end up buying in the big and famous showrooms. Instead they prefer to buy from a jeweller who is closer in proximity and has built a rappot with his customers offering them discounts on latest designs and making charges.
If the gold sales were 45 tonnes last year and 15% higher this year which means almost 52 tonnes of gold means 52000kgs of gold sales on a single day. At an average price of Rs.1700 per gram which means about 17lacs per KG  the total revenues would be almost 9000 crores. How much has the government lost in terms of Salestax , VAT and Incometax on this huge single day sales is anybody's guess???

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