Gold is indeed a more precious metal than silver, and the price of silver is nothing as compared to gold price. Both gold and silver are highly used in jewellery making and also as a means of investment.
Although gold has more takers, silver has great potential for investment and should be used more for that purpose. However, the VAT (Value-added tax) imposed on silver investment makes investors walk more of the gold investment route. On the other hand, if you want to buy gold, you don’t have to part away with extra cash in the form of VAT.
Why VAT on Silver?
It is surprising to note that the VAT is imposed by the government only on silver and not on gold. So, is this a deliberate attempt by the government to discourage investors from eying silver, or is it to boost the gold investment? Silver prices being low, it is very much affordable for most to buy silver either as jewelry or for investment purposes. However, the VAT deters many to invest in silver.
Rarity of Silver
One of the reasons that experts suppose is the rarity of the silver metal as compared to gold. Silver metal is rare due to its limited resources tapped upon mining. So, if too many people start turning to silver for investment purposes, soon there will be a dearth of this grayish, shiny metal. So, this could be a wise move by the government to curb silver investment. And this is not wrong. Why tempt investors to put their money into something that’s rare and bound to get extinct if not controlled on time. Preserving the precious metallic resources of nature is crucial to a nation’s economy and global financial condition in turn.
Silver – Greater Use in Industry
Silver is highly used in the industry for various applications apart from jewellery making. In fact, around 80% of silver is utilized by the industry. Gold being much more expensive isn’t used everywhere, but its use is restricted to jewelery and few other industrial purposes. So, as an investment tool, silver resources fall short if no VAT is imposed. Gold, on the other hand, is free for use as an investment tool in greater amounts. And hence, no VAT has been imposed on gold investment.
To Fleece Investors
Another point of view put forth by many is that this move by the government to impose taxes on silver investment is a deliberate attempt to divert investors toward the gold investment so that maximum advantage can be taken of them. Gold is expensive yet subject to hoarding, and maybe that is what the government wants.
Varied viewpoints to support and protest against imposition of VAT on silver and not on gold have been proposed by experts as well as laymen. While this may seem like a loss to some, others may find this a valid decision. So, rather than hankering on what’s justified or not, why not use this policy to the best of your advantage. Government policies keep on changing; investors need to cash in on the existing policies to their maximum advantage.
Changing the Demand-Supply Ratio
In this age, VAT has been imposed on almost anything such as food, entertainment, and shopping. So, why will they leave this grayish, shimmery metal? Gold is already highly priced, so anything extra to be paid on that will only deter gold investors. Moreover, it is also about the demand-supply equation.
If the VAT on silver is worrying the investors, it’s time to move away from that path. If the demand for silver reduces considerably, the dynamics will change too, and VAT may be removed from silver investment in the coming years. So, the best way to influence the decisions of the government is not by complaining but by forcing them to change their decisions in the most strategic way.