Amid the government’s quest to keep the deficit within the budgeted target, despite sluggish domestic demand, India’s gold imports in August nearly tripled from a year ago, as a recent tax change that allowed importers to ship in the yellow metal from South Korea without paying customs duty saw some traders purchasing heavily from the country.
The provisional data from consultancy GFMS (formally Gold Fields Mineral Services) showed that August gold imports climbed to an estimated 60 tonnes from 22.3 tonnes a year ago. In the first eight months of 2017, the imports rose to 617.5 tonnes, up 158 per cent from a year ago. Trade houses imported nearly 20 tonnes from South Korea as they were not required to pay import duty.
India imposes a 10 per cent import duty on gold, but this was not applicable to countries with which it has Free Trade Agreements (FTAs), like South Korea. To avoid duty-free imports from those countries, the government had previously imposed a 12.5 per cent excise duty, which was scrapped along with other local taxes when the GST was introduced on July 1, allowing buyers to import gold from South Korea without paying import tax. However, after realising the loophole the government on August 25 restricted imports of gold from South Korea.