As per the new rules, the original precious metal used in making jewelry will no longer be taxable and VAT will be levied only on “the seller’s commission and fees charged on designing and making the jewelry.”
Jewelers for long had said that VAT should be levied only on fees they charge for “making jewelry”. They say the new VAT rules can benefit gold sellers because prices would be more attractive to buyers and they can increase their sales.
Citing the head of the Ahvaz Gold and Jewelry Union, ISNA reported that that new rules should help lift the sluggish bullion market.
“This will have a significant impact on gold trade. For example, jewelers charge 1.3 million rials in VAT on one gram of gold. This will drop to 250,000 rials per gram after the new VAT rules,” Abdolrahman Zahbizadeh was quoted as saying.
Market observers say the competitive edge of domestic gold and jewelry producers was undermined under the previous VAT system.
Earlier Mohammad Kashti-Aray, vice president of the Tehran Gold and Jewelry Union, said the new VAT mechanism has long been a key demand of members of the union.
He expressed the hope that the new regulations will help boost the domestic gold industry and stimulate demand for the yellow metal.
Jewelers charge 9% VAT on sales. As the original value of gold constitutes the major part of the price, 9% VAT is way too high. Observers say under the previous rules, people preferred to buy scrap gold, which is a bane for the jewelry industry.
The new measure is part of broader VAT rules debated in the Majlis in the past two years.