MUMBAI: The government has taken the first concrete step to deal with duty free imports of gold jewellery and coins from South Korea under ASEAN Free Trade agreement (FTA) , which domestic trade associations allege are distorting the market by putting those importing bullion at 10% duty at a distinct disadvantage.
The finance ministry issued a circular last week asking importers to provide, among others, information about origin of such goods, whether made in South Korea and if so to provide photographs of exporters' manufacturing facilities, raw material used in their manufacturing, name and address of the manufatcurer, manufacturing capacity etc. Customs would release further consignments from South Korea only if the responses furnished are satisfactory, sources said, amid concerns that some of the jewe ..
ET has reviews a copy of the circular.
The issue cropped up after GST, the new indirect tax that subsumed Vat and excise, kicked in on July 1. Gold and jewellery imports under the ASEAN free trade agreement at concessional 1% duty were subjected to a 12.5% excise ( CVD) to create a level playing field with domestic players selling bullion at 10% import duty pre-GST. Jewellery made from the bullion in turn attracted 1% each VAT and excise levy, taking the total tax on ornaments to a little over 12%, inclusive of a cess.
However, with GST on gold being fixed at 3% those importing under FTA agreement from ASEAN nations would not have to pay the Countervailing duty put in place earlier to check misuse. They can now import duty free by paying a 3% IGST, which can be recovered from the customer. This is because any change in duty structure cannot be done unilaterally under FTA.
The All India Association of Gold Refineries & Mints alleged that the treaty was again at risk of being misused as certain importers could melt the jewellery and coins into bullion and sell it at a discount to the prevailing gold rate inclusive of 10% duty.
" Such imports are market and price distorting and put domestic manufacturers at a distinct disadvantage," Rajesh Khosla, president, AGRM, told ET earlier. AGRM has brought the issue to the notice of the government since GST was introduced last month
Against this backdrop, the new circular to prevent potential misuse could provide relief to the industry.
" This is the first step (by the government) and could be a potential deterrent against misuse of the ASEAN FTA, " said Surendra Mehta, national secretary, India Bullion & Jewellers Association .
Trade sources claim 10 tonnes have so far been imported from South Korea. They add that the FTA provides that bonafide imports should originate from the country of export and once imported into India should not change form, that is be melted, but sold as is.
Source: Economic Times