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Restrictive GST Exemption Impacted the Export of Finished Gold Jewellery

 

Ermin Siow, President, Federation of Goldsmiths and Jewellers Association of Malaysia, opines that using only LBMA bars to get GST exemption has impacted the gold jewellery export, while slowdown in economy, high gold price, change of customer behaviour etc. have impacted the jewellery fabrication in the country. Excerpts…

 

Malaysia’s gold jewellery fabrication has come down substantially over the years. What are the main reasons behind this slump?

 

The decline in gold jewellery fabrication in Malaysia could be due to several factors:  a) due to slow down generally in the overall economy which directly affect the purchasing power, b) changes in purchasing habits and the keen competition from the other commodities and goods, c) lack of interests , especially the younger generation towards gold and other precious jewellery , and last but not least, the higher gold prices also deter or discourage purchases.

 

 It is widely written in the media that introduction of GST in 2015 has impacted the jewellery demand in the country. What is your view? Is it temporary as is the case when GST was introduced in other countries? Or, it will impact further the demand in long run?

 

Personally I felt the introduction of GST did affect negatively the jewellery retail trade initially but the continue slow down of the trade could be due to other factors as mentioned above.

 

What is the general habit of buying gold in Malaysia? Is it basically for investment in form of bars and coins, or gold jewellery is preferred for adornment?

 

Purchasing of gold jewellery for investment purpose is of the minority. Main reasons are for adornment and as gifts for certain occasions.

 

How central bank of Malaysia looks at gold? Is it considered currency or commodity?

 

Gold has always been look upon as more of a commodity than currency , but it also form part of the bank's foreign reserves portfolios , amidst a minor one.

 

  “The exporters have to accept only LBMA-certified gold bars as payment, should they want exemption from GST for the export of their finished gold products”. This has impacted the export as per the Penang Goldsmith Association. Do you agree? If yes, what should be done to help the industry?

 

One of the terms and condition for exemption of GST for importing gold bullion is they must be LBMA accredited. This has impacted the exporters of finished gold jewellery because the main export market is in Middle East and the gold bars they brought in mostly not LBMA accredited. They have to incur additional cost to convert to LBMA bars to enjoy GST exemption. To avoid being taxed upfront, the exporters need to apply for special permit under ATS or ATMS, which stand for Approved Trader Scheme and Approved Trader Manufacturer Scheme respectively.

 

As per my record, Malaysia is perhaps mining around 4 odd tons of gold in year. What is the potential of gold mining in the country?

There are only a few working gold mines and annual production around 5 metric tonnes. I  personally feel that the potential for large scale gold mining is not there, probably due to limited deposits.

 

Central bank gold reserve has come down to half in recent years. What is the reason?

I am not privy to the information as to the actual amount of gold reserves held by our Central Bank, but as far as I am aware, it has remain quite constant, around 30 metric tonnes.

 

Disclaimer: Views are personal and not the views of the publisher.