Indian Banks Restart Gold and Silver Imports After Month-Long 3% Levy Standoff

Indian banks have resumed gold and silver imports after suspending shipments for more than a month following the imposition of a 3% Integrated Goods and Services Tax (IGST) levy on bullion imports, as per a Reuters report. 

The disruption began at the start of the new financial year on April 1, when customs authorities started seeking IGST payments from banks clearing bullion cargoes.  

Since 2017, banks importing gold had received annual exemptions from the levy through government notifications. 

April Imports Drop Sharply 

The halt in shipments led to a steep fall in India’s gold imports during April. Trade estimates showed imports at nearly 15 metric tonnes, compared with monthly averages of around 60 metric tonnes during the previous financial year. 

The decline came during Akshaya Tritiya, one of the country’s key gold-buying periods. Bullion dealers said several banks delayed shipments while waiting for clarity from the government on whether the exemption would continue. 

As per the report, banks have now started clearing consignments after agreeing to pay the 3% levy. Around 9 metric tonnes of gold and 34 metric tonnes of silver have been cleared so far in May. 

Impact on Trade and Currency 

India is the world’s second-largest gold consumer after China, and banks account for a large share of refined gold imports into the country. Higher imports are expected to increase pressure on the trade deficit as bullion purchases are largely settled in US dollars. 

The rupee has remained under pressure this year amid concerns over external balances and import costs. Prime Minister Narendra Modi recently urged citizens to avoid buying gold for a year to help preserve foreign exchange reserves. 

The disruption also affected imports of gold dore, a semi-pure alloy used by domestic refiners, as some import approvals were delayed during April. 

Domestic Market Conditions 

Despite the resumption in imports, local demand remained weak in the domestic bullion market. Dealers this week offered discounts of up to $17 an ounce over official domestic prices, including import and sales levies. 

Traders said supply conditions have improved after banks restarted imports, though jewellery demand has yet to show a meaningful recovery following the month-long disruption in shipments. 

Read More: India Launches $1.5 Billion Bharat Maritime Insurance Pool to Cut Reliance on Foreign Insurers & Boost Maritime Trade! 

Conclusion  

Banks have resumed bullion imports after paying the 3% IGST levy, improving supply in the domestic market. However, gold demand remains subdued despite the restart in shipments. 

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