The post-Budget demand for gold has almost become nil in the physical as well as the futures market, due to several taxes imposed by the government. When the physical market opened after three days of strike, volumes had dried. Similar was the case in the futures market, too.
On the Multi Commodity Exchange (MCX), where most of the gold trading happens, volumes which were Rs 18,573 crore on the Budget day, crashed to half in the following days.
On Saturday, volumes were miniscule.
This is because the high duty has hurt sentiment in the physical market and no activity has been happening for five days.
"Traders' morale is so low that they are refraining from trading and this has influenced futures volumes as well," said Rajiv Popley, director, Popley & Sons Jewels.
More than import duty, excise on jewellery and tax deducted at source (TDS) provisions have affected the volumes. Most customers and even traders and manufacturers were buying gold on cash terms. With one per cent TDS provision proposed in the Budget, dealings have almost stopped.
Popley said the Jewellers Association of Delhi, with the consent of leading jewellers all over India, have decided on an indefinite strike to protest the excise duty. The Gems and Jewellery Federation has also started protest marches against the taxes.
"It is not that jewellers do not want to pay excise duty. What we demand is that the process be made less complicated," Vinod Hayagriv, chairman of the Gems and Jewellery Federation, told Business Standard.
The federation had met finance minister Pranab Mukherjee. The minister told them to make their case before the finance secretary.
To address the grievances, the ministry has issued a clarification. The statement said even if artisans and goldsmiths manufacture and sell jewellery themselves, the benefit of small-scale exemption is available to them, provided their annual turnover in the previous year did not exceed Rs 4 crore.
Full exemption is available to those whose annual turnover does not cross Rs 1.5 crore in the current year.
"Taking the average price of gold to be Rs 27, 000 per 10g, the exemption implies that those who manufactured up to 49 kg of jewellery in the previous year would be exempted from duty for clearances of 18.5 kg of gold this year. As a result, most of small artisans and goldsmiths would remain exempt," the official statement said.