The BRICS TimesChina’s government has decided to scrap a Value-Added Tax (VAT) on gold. This move will likely increase gold prices, making purchases more expensive for consumers. The new rule became effective starting November 1, 2025.
Gold and silver prices have shown a recent decline. However, experts now predict a possible price surge again. China has ended a significant tax break on gold purchases. The Finance Ministry there confirmed the change. Effective November 1, retailers cannot claim a Value-Added Tax (VAT) exemption. This exemption was for gold bought from the Shanghai Gold Exchange. The rule applies whether the gold is sold directly or after processing. This decision may raise gold prices in China by three to five percent. This comes amid China’s already high demand for the yellow metal.
Why was this decision made?
This policy change happens as China’s real estate market struggles. The country’s economic growth has also slowed down. Removing the VAT incentive will now increase government revenue. However, the change makes buying gold more costly for the Chinese public. China is the world’s largest gold consumer nation. Higher prices could cause a short-term drop in demand. This temporary dip may increase global pressure on gold prices.
What the new rule entails
Under the new system, buying gold for investment purposes still gets a refund. The refund applies upon delivery from the warehouse after exchange purchase. But if this gold is converted into bars or coins for resale, VAT must be paid. The exchange will not issue a refund in this case. Exchange members buying non-investment gold can claim a 6% VAT refund. Also, customers buying gold directly from the exchange will not pay VAT initially. However, they must pay VAT when they eventually sell it.
What will be the impact on India?
Sharp buying over recent months had pushed gold prices to record highs. Gold entered an ‘overbought zone’ globally. Prices fell sharply later due to profit-taking. Decreased global tensions and lower domestic demand post-festivals also contributed. Now, this decision from China might cause prices to jump again. India is also likely to feel the effect of this move. Experts estimate a price increase of 3–5 percent in the country.
