9 th India International Gold Convention 2012 Taxation on gold, silver and platinum- India vs. Rest of the world
India – Bullion and Jewellery Sector � India is the world’s largest gold consumer market, due to its jewellery sector which constitutes approximately 80% of total gold demand. � India has one of the highest savings rate in the world; estimated at around 30% of the total income, of which, approximately 10% is invested in gold. Rapid economic growth, urbanisation and inflation continues to stimulate gold demand in the country � � As per 2011 Census, approximately 68.84% India’s population is in rural areas, which does not have sophisticated banking network/ system � � Gold is the second most preferred mode of investment behind bank deposits Gold is the second most preferred mode of investment behind bank deposits � With domestic inflation vis-a-vis strong domestic demand for the jewellery, in past 10 years, India has witnessed highest average increase in the price of precious metals, as compared to other major economies of the world Gold Price Increase – Average @ 18.5% ( www.gold.org) � Silver Price Increase – Average @ 22.9% (www.gold.org) � This has a spiralling effect on all other economic indicators �
Role of Jewellery in Indian Economy � Indian Jewellery has strong domestic demand as well as has substantial export market � Gems and Jewellery contributes approximately 17.5% towards India’s export revenue of FY 2010-2011 and the said percentage contribution has been consistent for over a decade. � Jewellery alone constituted 25% of the total exports of Gems and Jewellery sector (ie 4.4% of the total export turnover of India) United States of America is the one of the major importer of Indian Jewellery. � Approximately, 22.3% of the total export of gems and jewellery is to USA � � Gems and jewellery sector provides employment to approximately 1.8 million people directly and indirectly � In India, the importance of gold and domestic demand for gold jewellery cannot be undermined: Stability in the gold price, makes jewellery an effective option to invest savings � Tradition of “Streedhan”, wherein bride takes wealth in the form of jewellery at the time of marriage ; � Most effective source of investment for a country which lacks the banking infrastructure � Personal effects for ever increasing middle-class population of India � Special focus from the Govt. needed to enhance the potential of this industry �
Impact of Indirect Taxes $��������� �������� %���&������ !����� � ��" � ������������������� ������� ����� ����� � ������������ #������������� ������� ������������� ������ �������� #������������� ����� ���� � ����� ��� ����� ���� � ����� �� � !���� !���� ������� ������� /��.������������� ���,����-��,�.�� ���,)���("��)*+� ���,)���(�� ��)*+� !���� ���,����-��,�.�� ���,����-��,�.�� �����"����� ���,)���(�� ��)*+� ���,)���(�� ��)*+� '()������� ��)*+� � ����� ����� � ����0������&�� Cumulative burden of Indirect 12����(3 �����%���&������� Taxes in India – 28% to 44% �����"������ (approx.) '()������� ��)*+� ����� ������ �
Indian Tax Structure for Domestic Transaction � Excise duty, tax on manufacture, is increased from 10.3% to 12.36% � Ores ( Gold/ Silver) - Excise duty is exempted � Dore Bars Bars with � 95% Purity (other than tola bar) manufactured from ore/ concentrate/ dore bars Gold increased from 1.5% to 3% ad- valorem � Silver retained at 4% ad- valorem � � Waste/ Scarp of precious metal arising in course of manufacture Excise duty is exempted � � Jewellery (whether or not branded) Excise duty exemption is available (8 May 2012 to 30 May 2012) � Gold Jewellery 1% without Cenvat Credit – Silver Jewellery - Nil � Strips/ sheets/ wires/ plates and foils of gold used in the manufacture of jewellery is exempted � � Strips/ sheets/ wires/ plates and foils of silver is exempted Option to be pay Excise duty @ 6%, (especially for units catering to export sector), and avail CENVAT � credit/ refund of excise duty/ CVD paid inputs used to manufacture of jewellery �
Indian Tax Structure for Domestic Transaction � Bullions/ Coins/ Investment Gold Branded Bullion/ Coins – 6% - Avail Cenvat Credit [typically opted by export sector] � Branded Bullion/ Coins (irrespective of purity) – 1% - No CENVAT on inputs and input services � � Unbranded Bullions/ Coins – Exempted Branded Gold Coins ( � 99.5% Purity) and Silver coins ( � 99.9% purity) manufactured from duty paid � gold/ silver - Exempted � Primary Gold (unfinished/ semi-finished bars) Silver (other than mentioned specifically mentioned) / Platinum (unfinished/ semi-finished bars) mentioned) / Platinum (unfinished/ semi-finished bars) � Gold not converted from ore/ concentrate/ dore bar Excise duty is Nil � [Typically covers gold provided by customer] � Goods manufactured during process of copper smelting from copper ore/ concentrate Gold bars (other than tola bars) and Gold Coins � 99.5% Purity increased from 2% to 3% ad- valorem � Silver in any form ( except silver coins of < 99.9% purity) reduced from 6% to 4% � � Gold arising in course of zinc smelting Excise duty is exempted � VAT / CST is levied @ 1% on the bullions/ � jewellery/ articles of precious metals
Import Regulations for Precious Metal � Import of Gold/ Silver bars (irrespective of the purity) is subjected to following regulations Foreign Trade Policy 2009-2014 (‘FTP’) � RBI Regulations � � Chapter 4A of the FTP provides for various conditions subject to which “an eligible importer” can import gold/ silver bars into India Eligible importer means: (a) Nominated Agencies; (b) Export Oriented Units (i.e. EOUs); and (c) Special � Economic Zones (‘SEZ’) If any person wishes to procure imported gold/ silver, the same shall be routed through nominated � agencies; as the EOUs and SEZs units are not permitted to trade � Nominated Agencies means: MMTC Ltd, STCL Ltd, MSTC Ltd, � � Handicraft and Handloom Export Corporation (HHEC), State Trading Corporation (STC), � The Project and Equipment Corporation of India Ltd (PEC), � Diamond India Limited (DIL), � Gems & Jewellery Export Promotion Council (G&J EPC), � � Star Trading House (only for Gems & Jewellery sector) and Premier Trading House under Paragraph 3.10.2 of FTP and � � Any other agency authorised by RBI. �
Indian Tax Structure for Imports � Customs duty is levied on tariff value Gold - $527 per 10 grams ( ~ Rs 29,500) � Silver - $913 per 1 kilo gram ( ~ Rs 51,000) � � Gold ore/ concentrate used in manufacture of gold [Free to be imported] BCD: Nil – CVD : 2% (increased CVD rate from 1% to 2%) � [Imported by anyone without any restriction] � Dore bars Bars with � 95% Purity for manufacturing bars of minimum purity - 99.5%(gold) & 99.9%(Silver) Bars with � 95% Purity for manufacturing bars of minimum purity - 99.5%(gold) & 99.9%(Silver) Gold – BCD : Nil – CVD : 2% (increased CVD rate from 1% to 2%) � � Silver – BCD : Nil – CVD : 3% [no change] [Imported by actual user. Charge being CVD, CENVAT credit can be availed] � Bullions/ Coins- Investment Gold Gold bar/ coin having gold content � 99.5% or Silver in any form including coin having silver content � 99.9%, but excludes jewellery Gold – BCD : 4% - CVD - Nil (increased BCD rate from 2% to 4%) � � Silver - BCD : 6% - CVD – Nil [no change] [Imported by eligible persons] [These rates are commensurate with local excise duty rate] �
Indian Tax Structure for Imports � Platinum (other than jewellery) BCD 4% + CVD as applicable – (increased from 2% to 4%) � [Imported by any persons] � Jewellery of gold, silver or platinum BCD 10% + SAD 1% � CVD is exempted as corresponding excise is exempted � [Imported by any person] [Excise duty on jewellery manufactured by EOU and cleared to DTA in accordance with FTP is: For Plain Gold Jewellery - increased from 5% to 10% ad valorem � For Studded Gold Jewellery - 5% ad valorem � For Plain Silver Jewellery - 6% ad valorem] � � Special Additional Duties of customs (‘SAD’) is exempted for all items of gold/ sliver/ platinum other than jewellery Since, items other than jewellery is imported through nominated agency, such agencies would be � required to charge VAT on re-sale accordingly, SAD is not changed Further, since jewellery could be purchased by traded directly, each purchase shall be subjected to SAD � @ 1%, which is equivalent to VAT/ CST rate �
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