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.


US Commerce’s Ross to visit China for trade talks in early June

Updated 25 May 2018
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US Commerce’s Ross to visit China for trade talks in early June

  • China's Vice Premier Liu He has spoken with Ross over the phone, according to state media
  • President Trump this week floated tariffs on foreign car imports

BEIJING: US Commerce Secretary Wilbur Ross will visit China early next month for another round of talks amid ongoing trade frictions between the world’s two largest economies.
Ross will visit China from June 2 to June 4, the official Xinhua news agency reported on Friday, adding that Vice Premier Liu He, China’s chief negotiator in the trade dispute, had spoken with Ross over the phone. It gave no further details.
The trade dispute took on added complexity this week when US President Donald Trump announced a national security investigation into imports of cars and trucks, a probe that could lead to tariffs against China as well as key US allies such as Canada, Mexico, Japan and Germany.
US Treasury Secretary Steven Mnuchin told CNBC on Monday that Ross is aiming to negotiate “a framework” that could then turn into “binding agreements ... between companies.”
In the last round of talks in Washington in mid-May, China agreed to ramp up purchases of US agriculture and energy products, and the two sides worked toward a possible reprieve for ZTE Corp. from a US ban on American companies supplying the Chinese maker of telecoms equipment.
The developments and constructive comments from both sides eased fears that the United States and China could plunge into a trade war, but President Donald Trump said this week that any deal would need “a different structure,” fueling uncertainty over the negotiations.
Trump has threatened to impose tariffs on up to $150 billion of Chinese goods to combat what he says is Beijing’s misappropriation of US technology through joint venture requirements and other policies.
Beijing has threatened equal retaliation, including tariffs on some of its largest US imports, including aircraft, soybeans and autos.