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.


Iran says no OPEC member can take over its share of oil exports -SHANA

Updated 19 August 2018
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Iran says no OPEC member can take over its share of oil exports -SHANA

  • Senior Iranian diplomat urges OPEC’s secretary general to keep the group away from the political agenda of some members
  • Iran has asked OPEC to support it against new US sanctions

LONDON: A senior Iranian diplomat urged OPEC’s secretary general to keep the group away from the political agenda of some members and said none should be allowed to take over another’s share of its oil exports, Tehran’s oil ministry news agency said on Sunday.
“No country is allowed to take over the share of other members for production and exports of oil under any circumstance, and the OPEC Ministerial Conference has not issued any license for such actions,” SHANA quoted Kazem Gharibabadi, Iran’s permanent envoy to Vienna-based international organizations was quoted as saying.
Iran has asked OPEC to support it against new US sanctions and signalled it is not yet in agreement with Saudi Arabia’s views on the possible need to increase global oil supplies.