Gold EGR adoption: WGC suggests tax-free conversion from physical gold to EGRs and GST clarity

"EGRs allow investors to hold and trade gold in demat form backed by physical gold in SEBI-accredited vaults. Investors can convert physical gold to EGRs, trade them, and reconvert them via empaneled vault managers," WGC noted.

However, the document highlighted that "GST ambiguity limits adoption. While no capital gains tax applies when gold is converted to EGRs, GST treatment remains unclear, both on conversion and on the 3% GST already paid on the underlying gold. Industry stresses this should not become an extra cost, as it would discourage participation."

The report also flagged a lack of clarity at redemption, noting that "there is also no clarity at redemption on who (depositor, buyer, vault manager, or intermediary) must handle GST. As a first-of-its-kind product where physical gold converts into a 'security', EGRs lack GST precedent and create uncertainty around input tax credit".

The WGC has recommended strategic interventions to accelerate EGR adoption, saying: "Definitive GST and input-credit rules are critical. Conversion from physical gold to EGRs should be tax-exempt, redemption liability must be clarified, and input credits should be seamless. Clear assignment of GST responsibility at redemption is essential to avoid ambiguity."

According to WGC, the scale of the opportunity is substantial. India's household gold holdings are estimated at over 31,000 tonnes, valued at ₹314.9 lakh crore (US$3.4 trillion), as of 2025. The document stated that "mobilising even a small share of these holdings could unlock significant economic value by deepening financial markets, enhancing liquidity and strengthening capital formation."