3% GST opens room for cheap import of gold jewellery from FTA countries

Goods and services tax (GST) of 3 per cent on gold will open a window for cheap jewellery imports from Indonesia and South Korea from July 1. Now, a 12.5 per cent countervailing duty is charged on imports of such jewellery from countries with which India has free trade agreements (FTAs). As excise duty of 12.5 per cent will be replaced with 3 per cent GST from July, the countervailing duty would also come down. There would be no import duty on such goods from FTA nations. Commodity Trading Tips

According to a veteran bullion market player, “Instead of a normal duty of 15 per cent on import of gold jewellery, imposing a 3 per cent tax will make it lucrative for importers to flood the Indian market with cheap jewellery.” In February 2016, the government had proposed 12.5 per cent excise duty on gold jewellery. But jewellers were given input credit, making the effective excise rate 1 per cent. Countervailing duty was fixed at 12.5 per cent. As the government went on increasing import duty — from nearly 1 per cent in 2011 to 10 per cent in 2013 — to restrict import of gold to control a ballooning current account deficit, some found a loophole in the notification regarding import from FTA countries. This allowed import of gold jewellery at 1 per cent. Nifty Trading Tips