 "Provide level playing field to domestic gold refineries: Assocham")
Faced with sharp decline in margins for domestic refineries, apex industry body the Associated Chambers of Commerce and Industry in India (Assocham) has urged the government to raise countervailing duty (CVD) on unrefined gold (dore) and reduce excise duty on refined bars to provide level playing field for local producers.
In the Union budget for 2016-17, the finance minister increased in CVD on import of unrefined gold from eight per cent to 8.75 per cent. Apart from that the government also raised excise duty on refined gold bars manufactured from unrefined gold from nine per cent to 9.5 per cent. Further, excise duty exemption under existing area based exemption on refined gold was withdrawn.
The change in duty structure, therefore, resulted into a 50 per cent reduction in gross margins for refineries in excise paying area i.e. from 1 per cent to 0.5 per cent thereby making their business unviable. Apart from that the gross margin for refineries in excise-exempt areas also stand reduced from two per cent to 1.25 per cent, thus creating a significant balance in favour of excise-exempt refineries.
"Therefore, CVD on unrefined gold needs to be raised to 9 per cent and excise duty on refined bars made from unrefined gold to 9.25 per cent. This is required in order to restore balance between refineries in excise paying areas vis-?-vis excise exempt areas, since refineries are located almost equally in both areas, as such there would be no revenue loss and it will continue to keep refineries in excise paying areas viable," said the Assocham letter submitted to the Union finance minister.
While India imports about 800 tonnes of gold annually, the share of domestic refining using unrefined gold as feedstock has increased steadily from five per cent in 2012-13 to 25 per cent in 2015-16.
"The advantage of dore refining over importing finished gold is that value addition gets done within the country thereby generating employment, saving foreign exchange and generating tax revenues as direct taxes are paid to government on the refining income. There is ample opportunity to grow refining capacity further across the nation, which will only add to 'Make in India,' and simultaneously move up the quality chain," Assocham said.
This turnaround has come about since 2011-12, when government permitted import of mine dore, maintaining an aggregate (CVD plus excise) one per cent duty differential between duty on the raw material/bars manufactured from mine dore and that on import of finished gold.