India to import 25 T gold from South Korea, avoiding duty - industry officials

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 ship in gold without paying a 10 percent customs duty, industry officials told Reuters.

The cheap imports are putting pressure on local refiners and banks who cannot match the steep discounts being offered on bullion sales from the duty-free gold from South Korea.

"Already 12 tonnes have been landed from South Korea since the implementation of GST. By the end of this month imports could be around 25 tonnes," James Jose, secretary of the Association of Gold Refineries and Mints told Reuters.

India, the world's second biggest gold consumer 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), like South Korea.
To avoid duty free imports from those countries, India previously imposed a 12.5 percent excise duty. However, this was scrapped along with other local taxes when a Goods and Services Tax (GST) was introduced from July 1.
"Those who are importing from South Korea are reaping windfall gains," said Rajesh Khosla, managing director of MMTC-PAMP India, the country's biggest refinery.

"They are saving the 10 percent import duty. So they can give a $10 or $15 discount. Refiners are operating with a 0.65 percent margin. We cannot compete with someone who is giving a 1 percent discount," Khosla said on the sidelines of the International Gold Convention in Panaji, capital of India's western resort state of Goa.

South Korea is favoured for importing gold over other countries that India has FTAs with because of its ability to deliver bullion in the form of coins or other articles, which do not attract the import duty.

Gold discounts in India widened 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 in a questionnaire that asks them to specify whether the goods are manufactured in those countries, the official said.

"Very soon this issue will be resolved by putting on a countervailing duty," he said.
In the first seven months of the 2017, gold imports more than doubled from a year ago to 550 tonnes, according to provisional data from consultancy GFMS.

Gold imports more than doubled in July ahead of GST implementation

Gold imports by India are said to have risen in July on arrival of some delayed shipments booked ahead of the implementation of a new national goods and

services tax on the first of last month, according to a person familiar with the information.

Inbound purchases rose to 53.4 metric tons last month from 22 tons a year earlier, said the person, who didn’t wish to be identified because the data isn’t

public. Sequentially, imports of the metal fell from 72 tons in June. Total imports during January to July jumped more than 2 1/2 times to 625.5 tons,

according to data compiled by Bloomberg. Finance Ministry spokesman DS Malik declined to comment on the data.

While traders and dealers stocked up on gold inventories ahead of the levy of the national goods and services tax on fears of a higher duty, demand is

expected to slow in the second half of 2017 as buyers take time to transition to the new regime, the World Gold Council said last week. Consumption is

estimated to remain below a five-average of 850 tons and be in the range of 650 tons to 750 tons this year, it said.

“Such an increase in imports is not sustainable because the demand from the consumer side in the market is very slow and interest from the investment side

has also dried up on low returns,” said Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation, referring to the July jump.

Shipments from South Korea climbed in the month as importers took advantage of the lower goods and services tax rate and a free-trade agreement between the

two nations, the person said. Imports from most other countries are taxed at 10 per cent versus zero for those from South Korea.

While this is the first time there has been a surge in imports from South Korea, importers have previously made use of free-trade treaties with countries

such as Thailand and Indonesia in order to escape paying the import duty, said Bamalwa. This makes a strong case for the import tax to be lowered across the board, he said

Glod imports