b. n. vaidya & associates expectations & constraints of bullion trade - bhargava n. vaidya e...

B. N. VAIDYA & ASSOCIATES

EXPECTATIONS & CONSTRAINTS OF BULLION

TRADE

- BHARGAVA N. VAIDYAe – mail [email protected]

30th October 2004


INDUSTRY TARGET

• MAKE INDIA No. 1 BULLION DEALING CENTER

• TO UTILISE INDIA’S VAST GOLD ASSET IN PRIVATE SECTOR

• TO ACHIEVE A POSITION SIMILAR TO DIAMONDS IN JEWELLERY


HISTORY• Net Gold Surplus – for years• 1962 - Gold Control Act.Development• 1990 – Abolition of Gold Control Act• 1992 – NRI Imports• 1994 – SIL Import• 1997 – Authorised agencies / Banks• 2003 - Future/Forward trading in bullion• 2004- ????


EXPECTATIONS

• FREE TWO WAY BULLION TRADE

• PAPER BULLION REFORMS

• BANKING & FINANCE

• INFRASTRUCTURE UPGRADATION

• BULLION BANKING - REFORMS

• INTERNATIONAL BULLION EXCHANGE


FREE TWO WAY BULLION TRADE

• FREE IMPORTS OF BULLION AS IN ANY OTHER COMMODITY

• EXPORT OF BULLION

• ** ZERO IMPORT DUTY ***


PAPER BULLION REFORMS

• G.A.P.

• EXCHANGE TRADED FUNDS

• COLLECTIVE SAVINGS SCHEMS

• PAPER TRADING


BANKING & FINANCE

• Limits for Bullion Dealers / Jewellers

• Export Finance for Jewellers / Manufactures

• Supporting Industry

Brokers / Refining / Hallmarking .


INFRASTRUCTURE

• INSURANCE

• ASSAYING FACILITY

• TRANSPORTATION

• CUSTODIAN / DEPOSITORY SERVICE

• REFINING

• SUPPORT SERVICES


MATURED BULLION BANKING

• METAL ACCOUNTS

• MARGIN TRADING

• SPECULATIVE AND HEDGING ACCOUNTS

• BULLION AS A FINANCIAL PRODUCT

• TAPPING OF INDIA’S VAST BULLION RESOURCE


RETAIL BULLION BANKING

• GOLD ACCUMULATION PLAN / SAP

• GOLD - CERTIFICATES / GIFT VOUCHERS

• GOLD E-COMMERCE PRODUCTS

• GOLD DEBIT / CREDIT CARD


INTERNATIONALBULLION EXCHANGE

EXCHANGE TO TRADE• SPOT• FUTURES• OPTIONS• BULLION RELATED PRODUCTS

NO LOCAL TAXES


INTERNATIONAL INVESTOR / DEALER FRIENDLY

• EASY ACCESS

• TAX FRIENDLY

• TRANSPARENT

• MULTI CURRENCY SETTLEMENT


INTERNATIONAL METAL DEPOT

• Off shore vault for International exchange,

Associations & Banks

• Supply to Domestic Market

• Export to SAARC & Middle East

• Transfer of Stock between International

Bullion Houses.


IMPORTANCE OF GOLD IN INDIA

• Largest item in portfolio

(Rs.13,02,000+ Crores)

• Major forex asset

($ 280+ Billion)

• Liquidity


DIRECT INCENTIVE

ACTIVE ROLE BY

RESERVE BANK of INDIA

• Incentives for Gold Deposit Schemes & G.A.P.

• Support International Metal Depot

INCENTIVIES & TAX Sops for all players of Gold Deposit Schemes & G.A.P.


CONSTRAINTS

• CASH MANAGEMENT

• LOCAL TAXES COMPLEXITIES

• CONTROLS & SUPERVISION

• GOLD LOAN RISTRICTIONS

• REPUTATION IN EYES OF AUTHORITIES


CASH MANAGEMENT

• Handling Cash

• Cash Deposit with Banks

• Poor Banking System in Rural Area

• Difficulties in Easy Transfer of Funds

• Replacing Hawala – History


TAXES IN DOMESTIC TARIFF AREA

• State Levies : Salestax / VAT / Turnover tax / Surcharge Entry tax / Right to use Act- Tax / Stamp Duty

• Local Levies : Octroi / Cess

• Central Govt. Levies :

Custom Duty Income-tax/TDS SurchargeWith holding Tax / Central Sales Tax Stamp Duty / Excise

• CONTROLS & SUPERVISION

• Reserve Bank of India• Forward Market Commission – Consumer affairs Ministry• Customs/Financial Ministry• DGFT Commerce Ministry• State Government• Local authorities


CONTROLS & SUPERVISION

• Reserve Bank of India• Forward Market Commission – Consumer affairs

Ministry• Customs – Financial Ministry• DGFT - Commerce Ministry• S.E.B.I.• State Government• Local authorities


Advantages Of Gold Loan

• Free from Gold Price Risk

• Reduces Cost of Holding

• Jeweller to Profit from Design & Labour


REPUTATION

REPUTATION IN EYES OF

• AUTHORITIES

• CONSUMERS

• INTERNATIONAL DEALERS


RATIONALISATION

• Tax / Duty Rationalisation

• Reduction in Number of Agency Controlling

• Treat Gold as Currency so only one agency controls

• No Tax on Primary Gold


External Benefits

• L C Imports / Interest Arbitrage

• Export of Coins / Crude Jewellery

• Other Arbitrage


Discipline

• Money Laundering

• K Y C

• Transfer Pricing

• SRO

b. n. vaidya & associates expectations & constraints of bullion trade - bhargava n. vaidya e...

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