KOLKATA (miningweekly.com) – Indian bullion traders and jewellers have expressed concern that the reformed Goods and Service Tax (GST), which will be introduced on July 1, could impact on gold imports.
Several gold market participants have said that most designated gold importers, including nominated commercial banks and government authorised agencies, will either stop, or significantly slow down concluding import transactions under the new GST regime.
Under the current indirect tax structure, designated gold importers conclude transactions and are liable to pay a 10% import duty. An additional value added tax (VAT) of 3% is applicable, but only after importers sell bullion to dealers.
However, the GST sets a fixed indirect tax of 3% on the consignment value of gold, which importers will have to pay at the time of inward shipment. Hence, any importer will have to make an upfront tax payment of 13%, comprising the customs duty and the GST.
Traders say this will put importing agencies and banks under greater working capital pressures and increase carrying costs of consignments. Importers, therefore, are likely to reduce inward shipments and financially weaker importing agencies may even stop importing goods.
Fears of the impact of the GST on Indian trade have triggered a sharp rise in gold imports during May. While official import figures for the month are not yet available, trade circles estimate that about 126 t were imported, compared with 31.5 t in May 2016.
Industry estimates of gold imports during the first two months of the current financial year – April and May – will be worth about $8.8-billion, compared with $7.9-billion during corresponding months of the previous financial year.
An official with the Indian Bullion and Jewellers’ Association has said that while it is difficult to predict gold import trends post-GST, June’s imports could be slackening, as most jewellers are pushing sales and liquidating old stocks ahead of the new tax regime kicking in.
“There are no festivals in the coming two months and this, coupled with uncertainties of GST, will keep trade at a low ebb even as most market participants keep an eye on how GST unfolds,” he added.
Under GST, all goods and services will attract a uniform rate of indirect tax across the country and the new regime would subsume all local level levies and VAT imposed by various provincial governments.
All goods have been slotted into four categories: 5%, 12%, 18% and 28%. Gold has been put under a special rate of 3%. In the case of services, the bulk of these have been put under 18% tax with a few essential services levied at a lower rate of 5%.