Panaji: Indian traders are likely to import 25 tonnes of gold from South Korea in July and August, taking advantage of a recent tax change that allows importers to send in gold without paying a 10 percent tariff, industry officials told Reuters .
Cheap imports are pushing local refineries and banks that can not match the huge rebates offered on South Korea’s duty-free gold bullion sales.
“12 tonnes have already been landed from South Korea since the implementation of the GST, by the end of this month imports could be around 25 tonnes,” James Jose, secretary of the Gold Refineries and Mints Association told Reuters.
India, the world’s second largest consumer of gold after China, imposes a 10 percent import duty on gold, but this does not apply to countries with which it has signed Free Trade Agreements (FTAs) such as South.
To avoid duty-free imports from these countries, India previously imposed a 12.5 per cent excise duty. However, this was discarded along with other local taxes when a goods and services tax (GST) was introduced as of July 1.
“Those who import from South Korea are reaping unexpected profits,” said Rajesh Khosla, managing director of MMTC-PAMP India, the country’s largest refinery.
“They are saving the import duty of 10 percent, so they can give a discount of $ 10 or $ 15. The refiners operate with a margin of 0.65 percent, we can not compete with someone who is giving a 1 per Cent discount, “said Khosla on the sidelines of the Gold International Convention in Panaji, capital of the western Indian state of Goa.
South Korea is favored by the import of gold over other countries that India has FTA with its ability to deliver ingots in the form of coins or other items, which do not attract import duty.
Gold discounts in India were extended earlier this month to $ 11 an ounce, the highest in more than 10 months.
“The government is aware of the issue and we have asked industry associations to provide more data,” said a government official, who declined to be named.
The government has asked traders who are importing gold under free trade agreements to fill out a questionnaire asking them to specify whether the products are manufactured in those countries, the official said.
“Very soon this issue will be resolved by imposing a countervailing duty,” he said.
In the first seven months of 2017, gold imports doubled compared to a year ago to 550 tonnes, according to provisional data from consultancy GFMS.
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