“VAT relief could encourage people to buy gold. This can ultimately help revive the gold market,” Mohammad-Baqer Ma’boudi-Nejad was quoted as saying by Bank-e-Mardom (people’s bank) website.
The government recently announced new tax rules, as per which the original value of gold will no longer be taxable and VAT will be levied only on services, profit and fees.
“Compared to the past gold buyers will pay 8% less,” Ma’boudi-Nejad said, expressing the hope that the decision would stimulate Iran’s gold market in which prices have gone through the roof leaving most jewelers in a quandary.
“By removing VAT on the value of gold, we expect improvement in the work of companies producing ornaments. We also are hopeful about a [reasonable] increase in the demand for the metal,” he was quoted as saying.
Jewelers for long had said that VAT should be levied only on fees they charge for “making jewelry”. Observers say the competitive edge of domestic gold and jewelry producers was undermined under the previous VAT system.
They argue that high VAT on gold pushed the people to buy scrap gold and used jewelry, which is a bane for the jewelry industry. VAT on gold further undermined demand because of the higher prices leaving the people with little option but to buy trinket and costume jewelry.
Jewelers charge 9% VAT on sales as per existing laws. One gram of 18-karat gold in the local market Sunday was quoted at 10.5 million rials, the Tehran Gold and Jewelry Union website said.