You are here: Home » Markets » Commodities » commodity gold
Business Standard

Jewellers find new way to bypass tax authorities and launder smuggled gold

Consumers here are taking a bigger risk

Rajesh Bhayani  |  Mumbai 

Representative Image

have found another way to bypass and launder smuggled gold, say people in the know. With the Goods and Service Tax (GST) rate on gold rising to three per cent and a 10 per cent import duty, the attraction of its ‘unofficial import’ of gold has risen in the past year. In 2017, according to GFMS Thomson Reuters data, 134.5 tonnes was imported clandestinely. This is on the rise in 2018, said a person who tracks gold closely. Initially, after GST was implemented, when someone came to buy jewellery against his unaccounted money, this was sold for cash and the account book showed it as sale of new jewellery in exchange for scrapped old jewellery. An industry official said in such cases, the customer bill would account only for the making charge and GST on the former. Cash collected against the sale would be used to purchase unofficially imported gold. Thus, the smuggled product (already used to make jewellery) comes on the jewellers' books, while the cash collected is used for paying for the unofficial purchase.

Primarily conducted in jewellery costing less than Rs 200,000, where customer identity proof was not mandatory. ALSO READ: Indians are falling out of love with gold and have a new-found fascination Now, according to another source, have found another way of adjusting unofficially imported gold. He explain: “When a consumer comes with cash to buy jewellery, retail sale is made from unaccounted gold but instead of the earlier method of showing it as sale of new against old-scrap, the jeweller shows it as purchase of jewellery against old gold.” There is no GST on such buying of old gold. The transaction's size is kept below Rs 200,000; if needed, purchase and sale bills are made against another family member’s name. Consumers here are taking a bigger risk. Surendra Mehta, a chartered accountant and secretary of the Indian Bullion and Association, said, “Retail customers will end up paying huge when the income link data with the GST portal for such sale.” He estimates 150 tonnes of unofficial gold was adjusted this way over a year.

Gold or old?

  • Hiked GST rate on gold at 3% and import duty at 10% has given rise to 'unofficial import’ of gold
  • 134.5 tonnes said to be imported secretly in 2017
  • Retail sale of jewellery in cash (made from unaccounted gold) is being shown as purchase of jewellery against ‘old gold’, which is not subject to GST

Gold, silver slide on muted demand Gold slumped Rs 235 per 10 gm at the bullion market in Mumbai on Thursday on muted demand from local jewellers, even as the precious metal strengthened overseas. Silver also fell by Rs 365 a kg due to reduced offtake by industrial units. Standard gold (99.5 per cent purity) declined by Rs 235 to close at Rs 30,145 per 10 gm from Wednesday's closing level of Rs 30,380. Pure gold (99.9 per cent purity) also went down by the same amount to finish at Rs 30,295 per 10 gm, as against Rs 30,530 previously. Silver (.999 fineness) fell by Rs 365 a kg to close at Rs 38,765 against Rs 39,130 previously. Globally, gold steadied as the dollar came off the boil, though the market lacked direction and seemed unable to capitalise on escalating trade tensions. Spot gold was up 0.2 per cent at $1,244.95 at early trade. Silver was 0.7 per cent higher at $15.85 an ounce.

First Published: Fri, July 13 2018. 01:49 IST