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Duty Drawback Rates

In month of August the Union Commerce Ministry decide the Foreign Trade Policy. The ministries decided and announce to include Gem and Jewelry sector in duty drawback rates. The duty drawback rates are likely to be announced in fortnight or month for Gem and Jewelry sector. The exporters of Gem and Jewelry sector will charge the duty according to duty drawback rates.

The Gem and Jewelry industry was down in financial year. But the industry has turnaround the export and rise up for 2.26% in month of September 2009. The decision likely to be announced at very right time, as the Gem and Jewelry industry is in recovery process.

As per recommendation of the Gem and Jewelry Export promotion Council (GJEPC) the duty drawback rates of gold is Rs. 20.6 per gm and Rs. 20600 per kilo of gold Jewelry  exported and for silver Jewelry exported the duty drawback rates are Rs. 1030 per kilo. The Government will decide the final rates.

The whole sector of Gem and Jewelry will make profit. According to GJEPC the decision of inclusion of the sector shall promote and help the small exporters in small cities. Now the small exporters from small cities can  purchase gold from the open market, export the final product and can claim duty charged as the gold as per duty drawback rates announced on the gold which they have purchased from the open market.

These rates will also recover and turnaround the diamond industry but they have to wait for some period. The western diamond industry will come into light after Christmas. The chances of recovery are likely to come up in coming months.

Gold ETF-A better option to invest in Gold

In fact, this can be hardly diversification as only $7 billion in fusion of Gold holds the portfolio out of total $285.5 billion of US treasuries. Nationalized banks of India and even other international investors are in hurry to stocking up gold as they are losing trust in the dollar.

US, with its easy monetary policy, weak dollar had even become weaker. This is right time to invest in Gold as world’s reserve currency is rapidly falling down in value.

The retail investor should purchase gold as it is the highest quality asset and  the best way of  investment  in gold through Exchange Traded Fund (ETF).

As the investor trades with shares and mutual funds  in stock market, in the same way gold ETF  can traded in the stock market.  Approximately one gram of gold is equal to price of one ETF unit. Basically this is well managed funds, NAV track the price of gold in open market. Presently UTI, Reliance, Kotak, Quantum, Benchmark and SBI offer gold ETFs.

The trading of gold under Gold ETF is around Rs. 1058 crore. While gold worth over Rs 70,000 crore annually is sold in form of jewelries, coins, biscuits and bars in India. Therefore in form of investment the investors don’t have enough knowledge of security aspect of investing gold in electronic form. There were days when people were holding physical cash under the land and storing physical (paper) share certificate which was having major risk factors. Today, banks are managing passbook for your cash and share certificates are dematerialized in electronic form. Similarly, now gold can be dematerialized in electronic form with safer way to own it.

For new gold investors, the purity of gold purchased is not guaranteed as they have to depend on human honesty. In case of buying gold in electronic form, the purity of gold with gold ETF is non- existent. As far as denomination is concern, you can buy 1 gm or with Quantum you can also buy 0.5 gm of gold ETF unit which is very affordable. In case of reselling, you can sell physical gold at the price after deducting jewelry making charges. With Gold ETF, you don’t have the bear any kind of loss. You can avail wealth tax benefit if you go for Gold ETF. Also you can gain long term capital tax gain of 10% in case of Gold ETF which is 20% in case of consuming physical gold.

This is all about to invest in the simplest and efficient way in most precious metal in the form of Gold ETFs.