Industry Odisha Bureau, Oct 06: The GST Council is expected to weigh taxing nominated agencies’ gold imports on October 8. The aim is equal treatment for banks, agencies and exchanges. Importers could need more working capital.
India’s bullion market has outgrown the tax arrangements set in 2017. Back then, gold, silver and platinum entered through a few banks and nominated agencies. Certain agencies received preferential tax treatment under that system.
Since then, bullion exchanges have emerged as another import route. Duty and tax are paid through that channel. Different routes now carry different tax burdens. The GST Council is expected to address that gap on October 8.
What the proposal would do
The plan aims to align GST on bullion imported through banks, agencies and exchanges. Nominated agencies are government trading bodies permitted to import bullion. Today, banks and certain nominated agencies pay 3% GST on precious-metal imports. Government agencies such as MMTC and State Trading Corporation of India could be covered. The proposal remains under consideration.
Why parity matters
Tax parity has two aims. The first is commercial. Similar import routes would face similar tax, removing advantages based only on route. That would make import choices depend less on tax and more on business needs.
Renisha Chainani, chief research officer at Augmont, says this would level the playing field. She argues the 2017 exemption suited a market with far fewer entry points. With exchanges now available, she says all routes should follow one set of rules.
The cash-flow catch
Parity brings near-term strain. If agencies must pay GST upfront, more cash gets tied up in each import. The tax must be paid before the metal is sold onward. That raises working-capital needs and can squeeze margins. The strain lies in funding, not necessarily in the final tax burden.
Chainani expects banks and nominated agencies to moderate imports initially. Slower supply could briefly widen local premiums. A local premium is the extra cost of buying gold in the domestic market. Jewellers could also see bullion supplies slow for a time.
Exchanges could gain ground
The longer view looks different. Chainani expects more trade to shift towards bullion exchanges over time. She says gold pricing could become more transparent and better organised. For jewellers, clearer sourcing could simplify buying bullion. That shift is not assured.
Ending classification disputes
The second aim is legal clarity. Industry executives point to a recurring problem in how bullion is classified. Sometimes the budget changes classification codes without matching changes to tariff notifications. That mismatch leaves importers unsure what has legally changed.
Disputes then arise over whether a change covers the goods or just their label. Valuation disputes have added to prolonged litigation. Uniform tax treatment could leave less room for such arguments.
One market, one rulebook
The proposal tries to make tax rules match today’s bullion market. In the short run, importers may face tighter cash flows. Over time, consistent rules could make sourcing simpler and clearer for jewellers. Neither the near-term strain nor the long-term gains is guaranteed. Much depends on what the Council decides.
