A month after goods and services tax (GST) roll-out, a sudden deluge of gold imports from free trade partner South Korea has alarmed New Delhi. Swinging into action, the government is examining several options, including levy of safeguard duty on gold imports from South Korea to plug the route. Officials brainstormed on the matter through Tuesday, it is learnt. Among others, Revenue Secretary Hasmukh Adhia met Commerce Secretary Rita Teaotia to assess the situation.
In July itself, 8,400 kg of gold, essentially in coins, came to the country from South Korea, compared to almost nil last year in the same month. Sources said that traders may be exploiting the favourable reduction in tax incidence under GST by routing imports through Seoul, to take advantage of the India-Korea Comprehensive Economic Partnership Agreement (CEPA), the free trade pact.
”There is a sharp rise in gold imports after GST implementation, only from South Korea. We are looking at all options available to us as this is a big cause of concern. Before July, we were not getting gold coins or gold medallions, which we are getting now,” said a senior government official. He added that the FTA route should not be misused as it is going to impact the local domestic market. The ministry of finance recently notified rules under the India-Korea FTA, empowering the Director General of Safeguards to slap duty on such imports.
import from Korea is exempted from customs duty under the 2009 agreement, and the importer only has to pay 3 per cent IGST. Until June, the excise duty on gold and jewellery was 12.5 per cent
Shocks and surprises have not abated for the domestic car industry. There was a short-lived euphoria after the goods and services tax (GST) roll-out lowered the levy on passenger vehicles, especially luxury cars and sports utility vehicles. Now the manufacturers are staring at a situation where prices could be higher than those in the pre-GST regime.
The GST Council has recommended an amendment to increase the cess on all passenger vehicles above four metres and with an engine capacity of 1,500 cc and above to a peak of 25 per cent, from 15 per cent now. Such vehicles currently attract a GST of 28 per cent and a 15 per cent cess.
The Centre will have to amend the Schedule to Section 8 of the GST (Compensation to States) Act, 2017, for this increase to take effect. The increase in cess would be finalised by the GST Council. The move adversely impacts M&M, Toyota, and luxury carmakers such as Mercedes, BMW, Audi, and JLR.
The decision has upset the growth plans of the luxury car industry, which had seen a flat performance in the 2016 calendar year, owing to demonetisation and the ban on 2,000-cc diesel cars in the National Capital Region for the first eight months of the year.
Sandesh, with or without chocolate, will be taxed at 5 per cent, the government clarified on Thursday along with the goods and services tax (GST) rates for other items, including rakhis, idli-dosa batter and kulfi.
However, ambiguity persisted over whether the tax rate for plastic furniture would be 28 per cent as furniture or 18 per cent as plastic items. The sharp jump in tax on car leasing is also expected to be taken up in the GST Council meeting on Saturday.
The clarification comes amid reports that sweet shops have discontinued chocolate barfis and chocolate sandesh. The GST rate on chocolates is 28 per cent and Indian sweets are taxed at 5 per cent. Although milk is exempt in the GST, khoya, or concentrated milk, will attract 5 per cent GST.
“Sweet shops in Kolkata were in panic over different GST rates based on the types of sweets and ingredients. Now the government has clarified that the GST rate on all Indian sweets is 5 per cent,” said Archit Gupta, founder and chief executive officer of ClearTax.The GST was implemented on July 1 and subsumed most indirect taxes such as excise duty, service tax and value-added tax.
India’s insatiable appetite for gold jewellery was evident once again in the second quarter of calendar year 2017 (Q2CY17). The total demand for gold jewellery surged to 126.7 tonnes, rising 41% as compared to the previous corresponding period, suggests the latest report by the World Gold Council titled ‘Gold Demand Trends Q2 2017’.
At a global level, the overall demand for gold jewellery in Q2’17 surged 8% year-on-year (y-o-y) to 480.8 tonnes, the report says. The strong recovery, WGC believes, had been widely expected after exceptional import figures were reported, hitting an all-time high of 104.6 tonnes in May as the market stockpiled gold ahead of the goods and services tax (GST) rate announcement.
“Expecting a punitive GST rate, jewellers and consumers alike crammed their purchases into the first two months of the quarter, slowing down once the government confirmed that a 3% rate would be applied,” WGC says.
That apart, WGC also attributes the rise in gold jewellery demand to the festival of Akshaya Tritiya – a key gold-buying festival in the Hindu calendar. The timing of the festival this year, it says, falling over a weekend and coinciding with a dip in the gold prices saw sales rise nearly 30% y-o-y .Read More
The introduction of the Goods and Service Tax (GST) has pushed down activity in the services sector to a nearly four-year low in July even as manufacturing activity reels at an eight-and-a half-year low.
The widely-tracked Nikkei Purchasing Manager Index (PMI) on Thursday showed that PMI for the dominating sector of the Indian economy plunged to 45.9, its lowest level since September 2013. At an eight-month high, PMI had been 53.1 in the previous month of June.
The 50-point mark separates expansion from contraction.Output and new work declined for the first time since January, with rates of reduction the quickest since September 2013. This had an adverse effect on the labour market, with employment contracting over the month. Likewise, factory orders decreased in July, and at the quickest pace since February 2009.
According to survey participants, confusion over GST was mentioned by services firms as having caused a contraction in new work, leading to lower activity. This is in stark contrast to improving demand conditions and marketing efforts leading to a higher share of new work over the past four months.
Domestic sales of passenger vehicles (cars, vans and utility vehicles) expanded at more than 15 per cent in July — the highest pace in the first seven months of this calendar year. This growth, however, comes after a double-digit decline of 11 per cent in June, when companies regulated sales to reduce dealers’ loss on pre-goods and services tax (GST) inventory. Six leading companies, including Maruti Suzuki, Mahindra & Mahindra (M&M), Honda and Toyota, recorded high double-digit growth, as they replenished the inventory at dealerships.
The country’s biggest carmaker, Maruti Suzuki, has sold a record monthly volume of 153,298 vehicles in the domestic market during July, growing 22 per cent over last year. Maruti, the country’s most valued automobile company, made a new record at the bourses, with its stock hitting a fresh high of Rs 7,920 in Tuesday’s trade. It closed at Rs 7,859, up almost 2 per cent from the previous day. All vehicle segments, except vans, recorded double-digit growth for the company.
R S Kalsi, executive director (marketing & sales) at Maruti Suzuki, said recently that the performance of June and July should not be seen in isolation. Korean carmaker Hyundai, the second biggest player, reported a growth of about 4 per cent in July to sell 43,007 units. The lowering of prices on account of GST implementation and good monsoon will increase customer confidence and sentiment towards vehicle buying, said Rakesh Srivastava, director (sales & marketing), Hyundai Read More.
Factory activity plunged last month and had its deepest contraction in more than nine years after Prime Minister Narendra Modi’s new tax policy severely hurt output and demand, a survey showed on Tuesday.
The Nikkei/IHS Markit Manufacturing Purchasing Managers’ Index fell to 47.9 in July from June’s 50.9, its first reading below the 50 mark that separates growth from contraction since December and its lowest reading since February 2009.
A Reuters poll predicted a modest July dip to 50.8. But July brought the biggest month-on-month decline since November 2008, just after the collapse of Lehman Brothers triggered a financial crisis and brought on a global recession.
“New orders and output decreased for the first time since the demonetisation-related downturn.”
An output sub-index fell to 46.3, its lowest since early 2009, from 51.7 in June, while contractions were reported across all major sub-indexes in the survey, including new orders, purchasing activity and employment.”The introduction of the goods and services tax (GST) weighed heavily on the Indian manufacturing industry in July,” said Pollyanna De Lima, economist at Read More