Higher purchases by India could support global prices, trading near their highest level in a year.
Mumbai: Gold imports in August nearly tripled from a year ago, despite sluggish domestic demand as the implementation of the Good and Services Tax (GST) allowed importers to ship in the yellow metal from South Korea without paying customs duty. This led to some traders purchasing heavily from the country, provisional data from consultancy GFMS showed.
Higher purchases by India, the world's second biggest consumer, could support global prices, trading near their highest level in a year. It could also widen the country's trade deficit.
August gold imports climbed to an estimated 60 tonnes from 22.3 tonnes a year ago, GFMS said. In the first eight months of 2017, the imports rose to 617.5 tonnes, up 158 per cent from a year ago.
"Trade houses imported nearly 20 tonnes from South Korea as they were not required to pay import duty," Sudheesh Nambiath, a senior analyst with GFMS, a division of Thomson Reuters, said on Monday.
The country imposes a 10 per cent import duty on gold, but this does not apply to countries with which it has Free Trade Agreements (FTAs), like South Korea. To avoid duty-free imports from those countries, the government had previously imposed a 12.5 per cent excise duty.
This was scrapped along with other local taxes when the GST was introduced on July 1, allowing buyers to import gold from South Korea without paying import tax.
However, after realising the loophole the government on August 25 restricted imports of gold from South Korea.
In August, traders were selling South Korean supplies at hefty discounts as demand was weak, said Daman Prakash Rathod, director at wholesaler MNC Bullion in Chennai.
Dealers in India were offering a discount of up to $13 an ounce in mid-August over official domestic prices that includes import tax.
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