The government is likely to restore the gold import tax exemption available to banks after a recent issue related to Integrated Goods and Services Tax (IGST) disrupted shipments of the precious metal, according to a report by The Economic Times.
The disruption happened after customs authorities started levying IGST on gold imports made by banks under a long-standing exemption framework. This led to confusion in the market and affected gold imports into the country.
Under the earlier system, nominated banks and agencies importing gold for supply to jewellers were exempt from paying IGST at the time of import.
However, a technical issue in the customs system reportedly removed this exemption, resulting in banks being asked to pay the tax.
Industry bodies, including the India Bullion and Jewellers Association (IBJA), raised concerns with the government over the issue.
They warned that the sudden tax burden had slowed imports and disrupted the supply chain.
According to the report, the Centre is now working on restoring the exemption to normalise shipments. Once the issue is resolved, imports are expected to resume smoothly.
The disruption had created uncertainty in the domestic gold market at a time when demand was gradually improving. India is one of the world’s largest importers of gold, and banks play a major role in supplying bullion to jewellers and traders.
Industry executives said that the confusion over IGST increased working capital requirements for importers and affected the pricing of gold in the local market.
The report added that several gold shipments were delayed because banks were unwilling to import the metal without clarity on the tax treatment.
The government’s move to restore the exemption is expected to provide relief to bullion dealers, jewellers, and banks involved in gold imports.
Gold imports are an important part of India’s trade ecosystem and also influence the country’s current account balance.
Any disruption in shipments can impact domestic prices and supply availability.
