Gold industry wants government to impose customs duty on raw gold

Published on : June 30, 2017 Topic : Global Trade
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MUMBAI: India’s gold industry expects the government to impose a customs duty on raw gold, or dore, to shut any window of arbitrage that would exist between bullion and dore imports once GST kicks in on July 1.

Surendra Mehta, national president of India Bullion and Jewellers Association (IBJA), believes the government would issue a circular on the eve of GST, imposing a basic customs duty on dore. Until now, dore attracts countervailing duty (CVD) plus excise of 9.35% in the domestic tariff area. Bullion attracts 10% import duty.

The GST on gold is 3%. This subsumes VAT, excise, CVD and other levies, with the exception of stamp duty, from July 1. After the transition, therefore, dore importers in DTA will get a clean advantage of 6.35% over bullion importers since the CVD is subsumed in GST. To remote this arbitrage opportunity, the government is likely to impose a BCD to maintain the differential of 0.65% between dore and bullion, say market sources.

Meanwhile, to get the full benefit of refund and to step in as alternatives to nominated banks that have all but stopped importing gold on consignment basis until clarity emerges on GST, gold refiners have stepped up imports of dore. The temporary stoppage of imports by banks on their own accounts has caused the premium in the market to double to $3 an ounce over the past few days, said a banker.

Since GST refund for banking services is set at 50%, there are concerns that consignment import input credit to banks will be only 1.5% instead of 3%. The other issue leading to the slowdown in imports by nominated banks is the fear of a fall in gold prices between the time of consignment import and its sale to customers.

The bank will have to pay IGST of 3% upon import at prevailing price. If the price falls when they find a customer, banks are not clear whether they will get a full refund of IGST.

Source: The Economic Times
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