Indian Banks Restart Gold Imports After Tax Standoff

Indian banks have resumed gold and silver imports after a hiatus that stretched for more than a month by agreeing to pay a 3 percent customs levy that earlier prompted lenders to halt shipments, trade and government sources told Reuters. The resumption is expected to boost the country’s gold imports, widen the trade deficit and put more pressure on the rupee INR=IN, which is among Asia’s worst-performing currencies this year.

Worried about mounting pressure on India’s balance of payments and the rupee, Prime Minister Narendra Modi on Sunday urged people to avoid buying gold for a year to help preserve the country’s foreign exchange reserves. Stronger demand from India, the world’s second-largest gold buyer after China, could also support global gold and silver prices and help local jewelers replenish their inventories.

“We paid a 3 percent integrated goods and services tax (IGST) at customs to clear gold and silver shipments,” said the head of the bullion desk at a Mumbai-based private bank. “Banks waited for more than a month for the government to issue an order that annually exempts them from paying the 3 percent IGST. 

But as the government signaled it wanted to curb gold imports, banks gave up hope.” Banks, which import most of India’s refined gold, halted shipments at the start of the new financial year on April 1 after customs authorities began demanding IGST on the metal. When India adopted the IGST regime in 2017, gold-importing banks were exempted from paying the 3 percent levy.