China Ends Major Gold Tax Break

From 1 November 2025, the Chinese government ended a major tax break on gold transactions, a move that could raise gold prices and affect the global bullion market. Earlier, jewellers and gold dealers in China could claim value-added tax (VAT) credits when buying gold from the Shanghai Gold Exchange. Now, that benefit has been withdrawn. This rule applies to all kinds of gold, whether it is sold directly or after processing. It includes gold bars, coins, jewellery, and even industrial gold products. In simple terms, no one can now offset VAT costs, no matter what form the gold is in.

The main reason behind this decision is to raise government revenue. China’s economy is facing a slowdown, especially because of the weak property market and low domestic spending. The tax credit system on gold was seen as a loss for the government treasury, so removing it helps the state save money and increase income. This change shows that China is trying to tighten its fiscal policy and manage costs more carefully, even if it affects private traders and investors in the short term.

Because of the removal of the tax break, retail gold prices in China are expected to go up. Jewellers and dealers will now have to bear extra tax costs, and they are likely to pass these on to consumers. Since the rule covers both investment and non-investment gold, the effect will be broad-based, from bars and coins to jewellery and industrial uses. This could slow down gold buying among consumers and investors who were earlier attracted by lower prices.

Globally, this decision comes at a time when gold is already under pressure. After a strong rally earlier this year, prices recently fell sharply, with gold seeing its steepest decline in over a decade. Earlier in October, it had even touched US$4,000 per ounce before pulling back.

The article also notes that India’s gold demand has weakened too. In July–September 2025, jewellery demand in India fell by 31%, to 117.7 tonnes from 171.6 tonnes a year earlier. Total gold demand dropped to 209.4 tonnes, down from 248.3 tonnes in the same period last year. This shows that global gold demand is cooling, not just in China but also in other key markets like India, due to high prices and lower purchasing power.

For global investors, this move is significant. China is one of the largest gold markets in the world. Removing a major tax benefit means less incentive for local buying, which could slow overall gold demand. For jewellery companies and gold users, input costs may rise, leading to pressure on profit margins unless they raise prices. For gold investors, the move could act as a short-term negative, but central bank buying and safe-haven demand might still support global prices. In short, China’s policy change may look local, but its impact is global, affecting prices, demand, and investor sentiment across the world.