MUMBAI|KOLKATA: The likely loss of revenue to the Centre, if it were to cut gold import duty and raise proportionately the GST on jewellery, makes the odds on duty reduction highly unlikely at the upcoming Union Budget, according to India Bullion & Jewellers Association (IBJA) and Rajesh Khosla, a consultant to MMTC-Pamp.
The comments come in the wake of jewellers speculating a duty cut after commerce secretary Rita Teaotia called for a review of the 10% gold duty. The proposed review is aimed at preventing private importers from exploiting the differential between gold articles bought from countries that have a free-trade agreement with India and the levy on gold bars imported from non-FTA destinations.
In the past, some private companies imported gold articles and coins from Indonesia and South Korea at 0-1% duty, allegedly melted the shipments into gold bars, and sold them locally pricing in the normal 10% duty, making a windfall in the bargain. The government closed these routes but the commerce secretary believes a review of the 10% duty is still necessary to prevent further abuse.
However, the likelihood that the government would overshoot the fiscal deficit target of 3.2 per cent in FY18, its impact on sovereign gold bonds (SGBs), metal loans extended by banks to jewelers, and inventory with the trade seem to lengthen the odds on a duty cut, say industry sources. On market speculation that a duty cut could be accompanied by a proportionate increase in GST on jewellery, Surendra Mehta, national secretary, IBJA, said the latter was unlikely as it would ruin the jewellery t ..
An increase in the GST on jewellery to offset a likely cut in import duty on bullion would be “disastrous” for the jewellery trade, said Nitin Khandelwal, president of Gem & Jewellery Federation (GJF). He, however, believes the government could cut import duty without tweaking the 3 per cent GST on jewellery.
Khosla buttresses his argument against a duty cut by citing that unlike the import duty, the whole of which the central government gets to keep, GST on jewellery would have to be split equally with state governments, resulting in a revenue loss to the central government if a large section of the trade were to migrate underground. “I don’t think a duty cut is in the works at this point,” Khosla added.
ET’s back-of-the-envelope calculations based on precious metals consultancy Metals Focus’ net import data of refined gold and dore imports and of jewellery sales show that the government possibly earned around Rs 22,503 crore through import duty on gold in 2015, and Rs 13,024 crore a year later.
Source: economictimes.indiatimes.com