Gold smuggling likely to rise in India as festive buyers try to avoid new tax

A Indian legislation makes it mandatory for jewelers to keep records of customers’ personal identification numbers or tax code number for transactions above 50,000 rupees. (Reuters)
Updated 27 September 2017
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Gold smuggling likely to rise in India as festive buyers try to avoid new tax

MUMBAI: Gold smuggling in India, the world’s second-biggest consumer of the metal, is likely to rise during the country’s peak holiday season as buyers try to avoid paying a new sales tax and to dodge new transparency rules.
In August, India moved to include gold sales under the Prevention of Money Laundering Act (PMLA). The law makes it mandatory for jewelers to keep records of customers’ personal identification numbers or tax code number for transactions above 50,000 rupees (SR2,870).
Indian gold demand typically rises in the last three months of the year as consumer buy more for the wedding season as well as for festivals such as Diwali and Dussehra.
“The government implemented the PMLA rule but it didn’t take efforts to popularise. Customers are not aware of the rule and are hesitating in giving necessary details,” said Surendra Mehta, secretary of the India Bullion and Jewelers Association. “Unaccounted sale will rise in the festive season as some customers are trying to buy without bills.”
The tax avoidance recalls the unintended consequences of India’s decision to raise import taxes on gold to 10 percent by August 2013.
The duty failed to curb demand but revived smuggling networks which, the World Gold Council estimates, imported 120 tons of gold in 2016, over one-fifth of total annual arrivals.
“The new rule is turning out to be counterproductive. Instead of giving required details, customers are buying without proper receipts to save tax,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city Kolkata.
The sales tax on gold rose to 3 percent from 1.2 percent as part of a new nationwide sales tax regime that started on July 1.
“Jewelers are buying smuggled gold at discount in cash, then making jewelery and selling it to consumers without receipts,” said Daman Prakash Rathod, director at wholesaler MNC Bullion in the southern city of Chennai.
In India, less than 4 percent of the people pay income tax. Many tax evaders choose to park their illicit wealth in gold as it is nearly as liquid as currency in the country.
The new limit of 50,000 rupees is too low and makes it mandatory to seek identification details of almost each customer, said Kumar Jain, vice president, Mumbai Jewellers Association.
“The rule has hurt sentiments. Usually demand improves ahead of Dussehra but this year demand is very weak,” Jain said.
Indians will celebrate Dussehra on September 30, a holiday when buying gold is considered auspicious.
Rural demand for gold, the driver of two-thirds of India’s demand, was weak because of erratic monsoon rains and rising gold prices, said Mangesh Devi, a jeweler in the western state of Maharashtra, who caters mainly farmers.
Local gold prices have risen nearly 9 percent so far in 2017.
India’s food grain production from summer-sown crops is likely to fall 2.8 percent in 2017/18 from a year ago.


American Airlines ‘unaware’ of some Boeing 737 MAX functions until last week

Updated 15 November 2018
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American Airlines ‘unaware’ of some Boeing 737 MAX functions until last week

  • The FAA and Boeing are evaluating the need for software or design changes to 737 MAX jets
  • ‘Safety remains our top priority and is a core value for everyone at Boeing’

WASHINGTON: American Airlines Group Inc. said on Wednesday it was “unaware” of some functions of an anti-stall system on Boeing Co’s 737 MAX until last week.
Boeing and the US Federal Aviation Administration (FAA) issued guidance on the system last week after a Lion Air jet crashed in Indonesia on Oct. 29, killing all 189 people on board.
The FAA warned airlines last week that erroneous inputs from the system’s sensors could lead the jet to automatically pitch its nose down even when autopilot is turned off, making it difficult for pilots to control.
The system was designed to prevent the jet from stalling, according to information provided by Boeing to airlines.
“We value our partnership with Boeing, but were unaware of some of the functionality of the Maneuvering Characteristics Augmentation System (MCAS) installed on the MAX 8,” an American Airlines spokesman said.
“We must ensure that our pilots are fully trained on procedures and understand key systems on the aircraft they fly.”
Indonesian investigators said on Monday the situation the crew of a doomed Lion Air jet was believed to have faced was not contained in the aircraft’s flight manual. US pilot unions were also not aware of potential risks, pilot unions said.
The FAA and Boeing are evaluating the need for software or design changes to 737 MAX jets in the wake of the Lion Air crash, the regulator said on Tuesday.
The American Airlines spokesman said his airline was continuing to work with Boeing and the FAA and would keep pilots informed of any updates.
A Boeing spokeswoman said the manufacturer could not discuss specifics of an ongoing investigation but it had provided two updates for operators around the world that re-emphasize existing procedures to deal with situations relating to MCAS.
“We are confident in the safety of the 737 MAX,” she said. “Safety remains our top priority and is a core value for everyone at Boeing.”