GOLD REFINERIES RESUME OPS AS DISCOUNT ENDS

Import of dore (unrefined gold) has increased and the metal’s refineries have resumed normal business, with the end of discount in the import price.

Till a fortnight earlier, the prices quoted in India were at a discount of one to five per cent to the import one. That discount has disappeared and the price is quoting at a marginal premium to the cost of import.

According to James Jose, secretary, Association of Gold Refineries and Mints, “Since last March, the refining business was at a virtual halt, as selling of gold after refining was not viable. Prices are now moderating and demand has improved.”

Refineries in excise-free zones like in Uttarakhand were operative since September because they enjoy one per cent extra tax benefit. The discount in the open market on refined gold also came down to a little less than one per cent. From October, refineries in other areas also became operative with the discount having ended.

As a result, market players estimate import in October will be more than double from earlier months. Since April, the average monthly gold import has been around 30 tonnes; the October import is expected to cross 65 tonnes. To spur demand, jewellers have also offered discounts on sale of coins and jewellery. Future demand estimates await the coming goods and services tax (GST) and the rate to be chosen. The initial indication is of a four per cent rate.

“Given the current level of taxation and the high-value nature of jewellery sale transactions, a higher GST rate would take this trade to the unaccounted mode, as well as weaken the prospects for growth of the bullion and jewellery sector,” said James. His association has represented to the government that, “When the jewellery trade goes to the unaccounted mode, their raw material purchase of bullion will also go to the grey market , vastly damaging the business prospects of the official industry of refining and bullion trading. The present 10 per cent import duty has already converted a major portion of the trade to the grey market and a higher rate of GST on jewellery will aggravate the situation. Hence the GST tariff should be at a lower rate of one per cent, covering the entire value chain.” The association estimates of the average annual import of 1,250 tonnes, 200-250 tonnes is ‘unaccounted’.