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A number of traders have started importing gold coins and allied items at zero duty from countries that are part of a Comprehensive Economic Partnership (CEP) or a Free Trade Agreement (FTA) with India, after the goods and services tax (GST) took effect on July 1.
In March 2016, the government had imposed excise duty of 12.5 per cent on gold jewellery, which acted as a countervailing duty (CVD) on import of gold coins and jewellery from CEP and FTA countries. Traders then began importing gold spoons and bowls, where CVD protection was not available. The government had then blocked this route, too, for the past six months.
However, excise duty has been subsumed under GST. Therefore, the three per cent GST on gold is also applicable on gold import in any form. Import of gold items and coins from nations that are not part of a CEP or FTA will still attract 10 per cent basic Customs duty. The conditions under CEP had permitted import of gold in any form at a lower rate of duty, which gets reduced to zero after seven years.
With this route open once more, a half tonne of gold coins made in South Korea arrived in India last week. Another tonne of imported coins will enter the Indian market this week, according to insiders.
Industry experts say, "Such imports at zero duty are happening officially and disturbing the market. Even smuggled gold has a higher cost than this, as smugglers have to run a network."
Bullion Federation sif India ecretary Haresh Acharya says, "Zero duty imports are disturbing normal genuine business and it's also a big loss to the exchequer. The seller only pays income tax, which is meagre, and sells such imported coins at a discount."
He suggests the government stop such imports by imposing 12 per cent cess on all goods in this regard.