Increase in import duty on gold to encourage smuggling; Review Decision: Industry Body
New Delhi:
Jewelery and industry experts on Friday said raising the import duty on gold to 15 per cent would encourage smuggling and urged the government to review the duty rate on the yellow metal.
Effective June 30, the Union Finance Ministry increased the import duty on gold from 10.75 per cent to 15 per cent to check the current account deficit (CAD) and rising imports.
Ashish Pethe, President, All India Gems and Jewelery Domestic Council (GJC), said: “The sudden hike in gold import duty has taken us by surprise. We understand the government’s position with respect to the Indian rupee versus the US dollar. But this The hike would put the entire industry in one place and could encourage smuggling”.
He said GJC will hold talks with the government to resolve the situation in favor of the domestic industry.
World Gold Council Regional CEO (India) Somasundaram PR said India’s gold demand is largely met through imports, which at times when the Indian rupee faces some weakness, adds to the problem.
The rupee exchange rate hit a record low earlier this week amid high inflation and rising trade imbalance. He said the increase in import duty on gold is aimed at reducing gold imports and easing macroeconomic pressure on the rupee.
Somasundaram said, “However, the overall tax on gold has now increased from 14 per cent to 18.45 per cent and unless it is strategic and not temporary, it will strengthen the gray market with long-term adverse consequences for the gold market,” Somasundaram said.
Ahmed MP, Chairman, Malabar Gold and Diamonds said that import duty on gold has been reduced in recent times to check tax evasion and smuggling. “But the latest hike in import duty will again encourage smuggling,” he said. We urge the government to review the import duty hike on gold.
Saurabh Gadgil, chairman and managing director, PNG Jewellers, said, “At a time when the industry was pushing for reduction of duty on gold, the 5 per cent increase in duty on gold imports is astonishing.
Gold prices are already at high levels and now this increase will make gold costlier. The 5 percent increase appears to be an attempt to compensate for the currently high cost of energy. He said that though the end consumers will not be affected much by this hike, but business may be affected.
India is the second largest consumer of gold in the world after China. Imports are largely driven by the jewelery industry. Gold imports in volume terms stood at 842.28 tonnes from April 2021 to February 2022.