- Indian banks resumed gold and silver imports after agreeing to pay a 3% IGST tax
- Banks cleared nearly 9 tonnes of gold and 34 tonnes of silver imports in May
- Gold imports fell to a near 30-year low of 15 tonnes in April amid tax disputes
Indian banks have resumed importing gold and silver after a pause of more than a month, agreeing to pay a 3% integrated goods and services tax (IGST) that had earlier forced lenders to halt shipments, according to a Reuters report citing trade and government sources.
The move is expected to revive bullion inflows into the country, potentially widening India's trade deficit and putting fresh pressure on the rupee, already among Asia's weakest-performing currencies this year.
The resumption comes days after Prime Minister Narendra Modi urged citizens to avoid buying gold for a year in a bid to protect India's foreign exchange reserves amid concerns over mounting pressure on the balance of payments.
“Banks waited for more than a month for the government to issue an order that annually exempts them from paying the 3% IGST. But as the government signalled it wanted to curb gold imports, banks gave up hope,” the head of the bullion desk at a Mumbai-based private bank told Reuters.
ALSO READ:
“We paid a 3% integrated goods and services tax (IGST) at customs to clear gold and silver shipments,” the executive added.
Banks, which account for the bulk of India's refined gold imports, had stopped fresh shipments from April 1 after customs authorities began demanding IGST payments on bullion imports. Since the rollout of the IGST regime in 2017, gold-importing banks had typically been exempted from paying the levy.
According to a government official cited by Reuters, banks have started clearing pending bullion consignments in recent days after paying the tax. The official, who declined to be identified, said banks had cleared nearly 9 metric tonnes of gold and 34 metric tonnes of silver imports so far in May.
The return of bank imports has started easing supply tightness in the domestic market, though demand remains subdued.
“Supply has improved due to bank imports, but demand remains weak, leaving gold trading at a discount,” Chirag Thakkar, chief executive of bullion importer Amrapali Group Gujarat, told Reuters.
ALSO READ:
Dealers in India are currently offering discounts of up to $17 an ounce over official domestic gold prices, including the 6% import duty and 3% sales levy, according to the report.
India's gold imports in April are estimated to have plunged to a near three-decade low of around 15 metric tonnes after banks suspended shipments amid the tax dispute.
Analysts say stronger buying from India, the world's second-largest gold consumer after China, could lend support to global gold and silver prices while helping domestic jewellers replenish inventories ahead of the festive and wedding season.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.