The ban on trading in e-series contracts in precious and base metals by crisis-hit National Spot Exchange (NSEL) has forced investors to convert their demat certificates into physical delivery.
The NSEL on Tuesday announced discontinuation in trading e-series contracts till further notice. The government is finalising a notification empowering the commodity futures market regulator, the Forward Markets Commission, to resolve the NSEL payment crisis.
Investors are unable to sell their demat certificate after NSEL stopped its trading, the only option is to convert it into delivery. The Ministry of Consumer Affairs wants NSEL to settle around Rs. 56 billion dues to investors.
Investors are eagerly waiting for the August 14 deadline, when the NSEL will come out with the settlement schedule. After the ban on e-series, no future purchase in the product would take place. Investors, who have invested in e-gold, would get the physical delivery of the gold, Pankaaj Maalde, head-financial planning, ApnaPaisa.com, said.
Investors who have put in Rs. 10 lakh or less will be given priority by NSEL while making payouts, according to a directive from the commodities market regulator.
NSEL was offering e-series contracts in gold, silver, platinum, copper and nickel, among other metals, on its platform as investment products, which were held in demat form.
The Central Depository Services (CDSL) and National Securities Depository Services (NSDL) acted as the depository for e-series contracts of NSEL and issued depository certificates. The clearing and settlement, and pay-in and pay-out mechanism on these contracts were based on T+2 cycle.
Investors in e-series can also themselves get the commodity converted into physical form and sell it.
Below are some steps involved in converting e-gold into physical.
The e-gold units held in demat form need to be transferred to the designated beneficiary account of NSEL. A beneficiary account is a demat account in the name of an individual (single or joint holding). It is similar to a bank account. This account is to be used by the account holder for holding and transacting in demat units in electronic form.
Submit DIS & SRF
You first need to surrender the e-gold units to the depository participant (DP). You have to submit a delivery instruction slip to the DP along with the surrender request form (SRF)—which is available on the NSEL website freely.
The DP will hand over the e-gold units to the NSEL based on DIS. The depository participant then attests the signature of the investor on the transfer request form (TRF) and handover the same to the investor along with the DIS acknowledgement. Remember to take an acknowledgement of the delivery instruction slip. The investor then submits DIS and SRF to NSEL specifying the center of his choice from where he intends to take delivery.
Charges to be paid
On receipt of the copy of DIS and SRF, NSEL would compute charges relating to making and packaging charges of coin/ bar, delivery charges, VAT (value added tax) and other dues (if any).
The Exchange will communicate the total amount due to the respective client through the email ID provided in the surrender request form. The investor will be required to deposit a cheque of requisite amount favouring “National Spot Exchange Ltd” with the vault. In case the amount payable on above account will be more than Rs. 50,000, the payment will be acceptable by demand draft.
The minimum quantity e-gold units can be converted into 1gm gold coin, and in denominations of 8gm, 10gm, 100gm and 1kg or in combinations of these multiples. 1 unit of e-gold is equivalent to 1gm of gold. General applicable charges are Rs. 200 for 8gm and 10gm, Rs. 100 for 100gm, and no charges if the weight goes up to 1kg of gold conversion.
When you opt for physical delivery against surrender of demat units, you will be required to pay VAT as per the current rate. However, for buying and selling of e-gold units and taking / giving delivery in demat form, you will not be required to pay any VAT, octroi or other taxes.
Physical gold is stored in vault
Equivalent physical gold is kept by NSEL in designated vault having purity of 995 and is fully insured. Delivery of physical gold will be offered in specified denominations and at particular locations only, where NSEL has made vaulting and delivery arrangements. Delivery of physical gold will be made at Ahmedabad, Mumbai, Delhi, Kolkata, Indore, Kanpur, Jaipur, Hyderabad, Cochin, Bangalore and Chennai. Investor has to intimate NSEL about his preferred choice of center in the delivery instruction slip from among the said centers.
The investor can lift the commodity from the designated vault after seven days and within 15 days from date of submission of the request. In case of non-lifting of the delivery within 15 days, the holder shall be liable to pay storage charges for the entire month. You should carry the DIS acknowledgement and original SRF along with the proof of identification.
Procedure for physical delivery of e-gold:
Short-term capital gains were applicable at the slab rate while long-term capital gains, if the investment was held for over 36 months, were taxed at 20%.
- Submit a delivery instruction slip to DP with the surrender request form
- DP transfers the e-gold units to the NSEL account based on DIS
- DP then attest the signature of the investor on the transfer request form (TRF) and handover the same to the investor along with the acknowledgement of DIS
- Investor then submits DIS & SRF to NSEL specifying the center from where he intends to take delivery
- NSEL computes charges relating to making & packaging charges, delivery charges, VAT and other dues
- NSEL communicates the total amount due to the investor through the Email ID provided in the SRF
- Investor is then required to make such payment through DD/Cheque in favour of “National Spot Exchange Ltd”