ALSO READIndia gold imports to plunge during Diwali, Dussehra after pre-GST buys GST on gold: Buying and making jewellery to get expensive for customers GST rates fixed: 3% tax on gold, 5% on clothes costing less than Rs 1,000 Bad news for bullion: High GST rate could take much sheen off gold demand
The reason for the high import is that traders wanted to replace gold that was not earlier shown on the books ahead of the goods and services tax (GST). Once that is done, jewellers are in a hurry to sell jewellery ahead of the GST. That is also the reason for the gold price quoting at a discount in the spot market.
However, analysts say in June imports are expected to go down to one-third of what was seen in May. The reason is that there are no festivals around and the marriage season is almost over.
Jewellers are eager to sell jewellery ahead of implementation of the goods and services tax. According to trade experts, import in June is estimated at around 40 tonnes, of which a large share may be of dore, or unrefined gold, and the rest for export.
Since the domestic demand is low, little import is expected. Gold prices are quoted at a $2-3 discount in June, discouraging imports. Credit Suisse has said “the rise in gold deficit is worrying though. May was the fourth consecutive month of strong gold imports …. If GST/Akshay Tritiya/marriage/lagged impact of demonetisation are drivers, this should fade, but needs to be watched”, indicating that there is likelihood of gold import declining.
Surendra Mehta, secretary, Indian Bullion and Jewellers Association, said: “Gold is quoting at a minor discount as dealers are liquidating stocks due to the GST. Jewellers also liquidating as they will not get the excise benefit of 1 per cent post GST.”
After the GST, gold will attract a 3 per cent rate and the excise, along with the state level VAT, will be subsumed in the GST. In the calendar year 2017, gold import was 429 tonnes. Though this is much higher than in the past year, “it is expected to remain dull till jewellers get acquainted with the GST”, said a jeweller.
The World Gold Council had earlier stated that the jewellery industry will take at least a year to get settled after the GST is introduced.