Sunday, February 23, 2014

Jewellers tell govt to reduce gold import duty to 2%
Though import duty increase had reduced import through official channel, it fuelled smuggling of the precious metal to India.

The Gems and Jewellery Export Promotion Council has demanded the government to reduce import duty on gold from the existing 10 per cent to two per cent. The council comes under the ministry of commerce. In a memorandum to the ministries of commerce and finance, GJEPC said the government, with duty hike on gold imports,  had managed to bring the current account deficit under control.  

“Since the imposition of 80:20 scheme (under which 20 per cent of imported gold should be supplied to jewellery exporters), the desired curb in the total import of gold has now been duly achieved. So the import duty should be rolled back to much lower rate, say two per cent,” said Vipul Shah, chairman of GJEPC.

Shah argued that restriction on gold import had affected export of gems and jewellery, which recorded a marginal 2.22 per cent fall to Rs 1,63,943 crore in the first 10 months between April 2013 and January 2014 as against Rs 1,67,670 crore in the corresponding period last year. Finance Minister P Chidambaram, in his post interim Budget discussion early this week, ruled out any such possibility in near future. “Any call on gold import duty reduction will be taken after due assessment of CAD and its impact on the economy,” he said.

Though import duty increase had reduced import through official channel, it fuelled smuggling of the precious metal to India, as consumer demand for gold remained robust.

“At present, the 10 per cent duty makes the operations of smuggling economically viable. If the import duty is rolled back, then the menace of smuggling will not be anymore productive and hence the leakage will be prevented. More so, smuggling is dangerous for the overall export business and the reputation of the Indian sector as per Responsible Gold and Dodd Frank Act,” said Shah.

Meanwhile, a global precious metals consultancy has estimated gold import through smuggling in India has doubled to 200 tonnes in 2013 from 112 tonnes in the previous year. Also, World Gold Council projected gold smuggling in India at 150 tonnes in 2013.

“If the import duty is so reduced then it will also reduce the transaction cost of exports in as much as the exporter will not be required to block his fund of as high as 10% till the inward remittance does not come,” Shah added.

GJEPC has once again submitted its plea towards revision of the import duty and is extremely optimistic of implementation keeping the macro objective of the increase in exports in consideration. 

Courtesy: Business Standard