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Thursday, February 20, 2014
Jewellers urge reduction in gold import duty to 2%
Argue that the curb on gold import hit gems and jewellery export from India
Premier jewellery export promotion body under the Ministry of Commerce, Gems & Jewellery Export Promotion Council (GJEPC) has urged the government to reduce import duty on gold from the existing 10% to 2%.
In a memorandum to the Ministry of Commerce and Ministry of Finance, GJEPC said that the government has achieved the desired result of the import duty increase on gold as the curb on gold import has yielded the current account deficit (CAD) under control.
“Since the imposition of 80:20 scheme (under which 20% 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 2%,” said Vipul Shah, chairman of GJEPC.
Shah argued that restriction on gold import has affected export of gems and jewellery from India which recorded a marginal 2.22% fall to Rs 163942.91 crore in the first 10 months between April 2013 and January 2014 as against Rs 167669.77 crore in the corresponding period last year.
The 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.
Meanwhile, GJEPC argued that import duty increase in phases has reduced import through official channel but, fuelled smuggling of gold in India as the actual consumer demand of gold remained robust.
“At present, the 10% duty as applicable makes the operations of smuggling economically viable. If the import duty is rolled back then the menace of gold through smuggling route will not be any more productive and hence the leakage will be prevented. More so, the smuggling of gold is dangerous to the overall export business and reputation of the Indian sector as per Responsible Gold and Dodd Frank Act,” said Shah.
Meanwhile, 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.