International - India’s government may be considering further taxation on cheap imports of Indonesian gold jewellery in order to assist the local market.
This is according to global metals information provider Platts, which has recently been reporting that the “already slack local market” is being further dented by a free trade trade agreement between the Indian and Indonesian governments giving a tax break on gold jewellery imports.
India is the world's second largest gold consumer and relies almost 100% on gold bullion imports to feed demand.
Although there is virtually no gold mining activity in India, the cheap gold imports is putting even greater pressure on a difficult situation. Indian government data reveals that gold jewellery imports at 1% duty jumped to 6 000 kg in May from 400 kg in January.
Platts says that India's finance ministry and foreign trade departments are in discussions over renegotiations of its FTA with Thailand and ASEAN countries, including Indonesia, which currently benefit from import duties as low as 1%, according to sources.
Platts quotes a local Delhi source saying customs is now asking for a bank guarantee equal to about 16% duty which Indonesian importers are reluctant to give. Apparently, as a result of this, around 200 kg of Indonesian jewellery is waiting to clear customs in Hyderabad.