MoC seeks to amend gold entrustment scheme

The Ministry of Commerce is reportedly finding out a viable way to amend gold entrustment scheme aimed at easing import of gold and export of jewellery on industrial demand but the State Bank of Pakistan (SBP) is unwilling to alter prevalent criteria, well-informed sources told Business Recorder. Gold was exported under SRO 266. However, the SBP raised objections several times with the argument that the scheme is being misused through Hundi and Havala and demanded that it should be rectified.
According to sources, a new SRO 760 was issued in 2013 on the insistence of the SBP leading to a decline in jewellery exports. Jewellery exporters want exemption on the condition of notarisation - an agreement between the foreign gold supplier and Pakistan''s jewellery exporter.
The condition of notarisation makes it mandatory that the supplier of gold and Pakistani jewellery manufacture sign a pact to be duly stamped by Pakistani Foreign Mission regarding quantity of gold and jewellery.
An insider told this scribe that after the condition of notarisation only serious parties are in the market and all other suppliers and buyers are out from this business, adding that the second category of buyers are lobbying to do away with the condition of notarisation.
The SBP, sources said, argues that the government should get rid of all schemes and allow import if gold under a normal regime by imposing duty like in India. However, the non serious buyers don''t want to come under this scheme as in the event that they opt for this scheme, they would have to pay six percent withholding tax. Government has already allowed normal regime according to which they have to arrange the foreign exchange.
Commerce Ministry, sources said, has held three meetings with the stakeholders so far on this issue. The industry maintains that export and import of gold should be open. FBR has no specific input on it.
The sources said, Commerce Ministry, in an internal meeting has analysed the suggestions of all the stakeholders so that a viable mechanism may be formulated to resolve this issue.
In 2014, the government had lifted ban on the import of gold and gold jewellery subject to the following; (a) imports under savings in any one-month period are restricted to a maximum of 10 kg per exporter; (b) the penalty of default in export commitment is 5% of leviable duty under SRO 266, which was practically "nil", as customs duty and sales tax on import of gold was 0 percent. Therefore, import authorisation under the savings clause was cancelled, if an exporter failed to honour export commitment, within the stipulated timeframe; and (c) all import authorisations issued previously under SRO 266 were cancelled for those exporters who did not opt for a fresh registration or failed to apply for new jewellery passbook with effect from May 15, 2014.