Author: Paul Ploumis
11 May 2015 Last updated at 08:01:17 GMT
NEW DELHI (Scrap Monster): The Federation of Goldsmiths and Jewellers Association of Malaysia (FGJAM) has urged the government to withdraw the 6% Goods and Service Tax (GST) levied on locally fabricated gold bars. Currently, only gold bars certified by the London Bullion Market Association (LBMA) are exempt from tax.
According to FGJAM, majority of the gold bars sold in Malaysian market are domestically fabricated and hence attract 6% tax. Ermin Siow Der Ming, President, FGJAM stated that the tax on gold adversely affects jewellery exporters also, as they have to pay tax at the same rate to customs. Even though, the exporters could claim back this amount later, the tax system affects their cash flow, Ming noted. As per estimates, Malaysia had exported nearly 50 tonnes of gold in 2014.
Meanwhile, the government had recently introduced Approved Jeweller Scheme (AJS) in order to ease jewellers cash flow issues. The scheme grants temporary suspension of GST payment on non-LBMA certified gold bars to approved jewellers. However, FGJAM notes that not every jewellery exporter qualifies for AJS as they are required to obtain a bank guarantee or bond or both to cover their revenue. The cost of obtaining such guarantee from bank is often huge, depending on business turnover. A jewllery exporter will have to spend approximately RM 15,000 in order to obtain a bank guarantee of RM 1 million.
Retailers in the country noted that revenues have dropped by nearly 30% since the introduction of GST. The trade body during its interactions with the Malaysian government has highlighted the broad-based effects of GST on the gold and jewellery industry in the country. FGJAM has already submitted a detailed memorandum to the Ministry on this subject and is awaiting the ministry decision on the date of dialogue.