On last Friday, the government restricted the duty free import of precious metals like gold and silver from South Korea. The ban was imposed after there was a huge rise in duty free gold import from South Korea after July 1, 2017. Now importers will not be able to import gold and silver from South Korea without getting a license to import from Directorate General of Foreign Trade (DGFT) which is the agency responsible for implementing import and export policies in the country.
Reason behind sudden rise in Gold import from South Korea:
India has Free Trade Agreement with South Korea in the import of gold and silver from January, 2010. The FTA agreement states that importer has to pay no duty on the imported metals but to make things balanced, 12.5% countervailing duty was imposed by the government on items and jewellery made of gold and silver.
Although the import was duty free but, 12.5% countervailing duty was balancing the things and was restricting gold and silver importers to import such expensive metals in access. But as we all know that the government implemented Goods and service Tax (GST) from July 1, 2017 which applied a uniform tax system all over the country. The result of GST was that it abolished the 12.5% countervailing duty and subsumed excise duty. Now only 3% GST was imposed on gold. This whole scenario made importing of gold from South Korea more profitable with effect of FTA whereas 10% customs duty is imposed in case of importing gold from other countries.
So, gold importers took benefits of the situation and imported gold from South Korea in huge quantity. As per the statistics, gold import surged to $339 million between the period of July 1 and 3 August 2017 whereas only $70.5 million import was done in 2016-2017.
Fact: Gold consumption in India was 674 tonnes in 2016 which made India world’s second largest consumer of gold. The largest consumer of gold in the world is China.