Jewellers have found another way to bypass tax authorities 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 fascinationNow, according to another source, jewellers 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 Jewellers Association, said, “Retail customers will end up paying huge capital gains tax when the income tax authorities link data with the GST portal for such sale.” He estimates 150 tonnes of unofficial gold was adjusted this way over a year.