While the government plans to curb significantly risen imports by raising customs duty on gold, however, jewellers believe this will also give rise to the smuggling of the yellow metal to a large extent for evading taxes. The Centre increased gold import duty to 15%.
Ahammed MP, Chairman, Malabar Gold & Diamonds said, “The government decision to increase the import duty on gold to 15% including the agriculture infrastructure development cess (AIDC) of 2.5% will have a major impact on the jewellery trade.”
“The increase in import duty is likely to give a rise to gold smuggling to a large extent for evading tax. As a result, the government stands to lose a huge amount of revenue from tax collection,” Malabar Gold chairman added.
Further, the chairman said, “In fact, the import duty on gold has been reduced in recent times to curb tax evasion and smuggling. But the latest hike in import duty will fuel smuggling again. We urge the government to review the import duty increase on gold.”
On July 1st, the Finance Ministry hiked gold import duty to 12.5% from 7.5% – resulting in a hike of 5%. While the effective gold duty will be 15% from 10.75%. However, the total levies on gold are likely to be around 18.45%.
FinMin said, “there has been a sudden surge in imports of gold.”
In May, a total of 107 tonnes of gold was imported and in June also the imports have been significant. The surge in gold imports is putting pressure on the current account deficit.
It said, to curb import of gold, customs duty has been increased from present 10.75% to 15%.
According to Sugandha Sachdeva, VP- Commodity & Currency Research, Religare Broking, in an attempt to stem the steep decline in the rupee and curb the widening trade deficit, which has soared to record highs of $23.33 bln in May amid rising import bills, the government has raised the import duty on gold by 5% in a surprise move, which makes the import duty on gold as 12.50%, while the effective duty on gold will be 15%, including the 2.5% Agri Cess, as social welfare surcharge of 0.75% has been exempted. In all, the net duty change will be 4.25%. Gold also attracts an additional 3% GST, which means the total levies on gold will be 18.45%.
On MCX, gold futures maturing August 5, 2022, jumped 2.3% or ₹1,161 to ₹51,678. Overall, the climb is around 2.5%.
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