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GST impact: Gold importers, exporters to face many operational issues

Importing agency will have to pay 3% IGST on gold brought into the country

Rajesh Bhayani  |  Mumbai 

GST: Gold importers, exporters to face several operational issues

The financial cost of importing and diamond is set to increase on account of Integrated Goods and Service Tax (IGST), as importers' capital is likely to be blocked until refund comes. Even as exporters propose to raise bank guarantees to avoid refund complexities, domestic traders, as well as and exporters of are expected to face several operational issues when is implemented from July 1. 

The industry is generally happy with the three per cent rate applicable on gold, but it remains worried about the operational difficulties of doing business. Industry players have made representations on this to the finance ministry and, “we were assured that such operational issues would be addressed at the council meeting next week,” said an industry representative.

In case of imports, the agency -- a bank or a nominated one -- has to pay of three per cent for bringing into the country. When it sells the imported to a dealer or a jeweller in the domestic market, it has to apply for a refund, which usually takes long to come. This will increase the cost of operation. On any transfer among branches, would have to be paid and one could recover this from the customer only at the time of sale. “Working capital required for conducting business will increase,” says Shekhar Bhandari, senior executive vice-president and business head, global transactions, Kotak Mahindra Bank.

According to an industry veteran, this additional cost will have to be borne by the buyer of While this is for the domestic market, import of comes through a different channel. The that is imported for exports is duty-free, but the importer gives a bank guarantee equivalent to a 10 per cent duty and an undertaking that such would not be diverted for domestic use. The Gem and Jewellery Export Promotion Council Executive Director Sabyasachi Ray says: “While representing to the government, we raised the question why we must pay on imported for exports. will give bank guarantees for 13 per cent. A similar provision can be made for rough diamonds, which attract 0.25 per cent ” This is because exporters’ experience of getting a VAT refund is quite bad; it takes two years for the refund to come. In any case, 95 per cent of all rough diamonds are used for exports.

Another issue that has raised is that being charged at 18 per cent on making charges will be another big burden for karigars. That’s also a burden for exporters who have to claim the refund. Additionally, wants that exporters should not have to first pay tax on making charges and then claim refund. The council is also meeting the governments all states where diamond and procession takes place.

First Published: Fri, June 09 2017. 02:32 IST
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