The hike in import duty for gold from 10 per cent to 12.5 per cent, along with 3 per cent GST, has taken the total tax on gold to 15.5 per cent, providing potential stimulus to smuggling. Bullion analysts estimate that a staggering 200 tonnes of the precious metal would make its way into the country illegally this calendar year, reports Business Standard.
This is over and above the existing quantity of gold currently being smuggled into India, and the figure could go up to as much as 300 tonnes within the next 12 months.
Official sources say that the finance ministry is aware of the possible spike in smuggling activity and has already asked intelligence agencies to tighten their vigilance and come down on the unofficial entry of gold into India.
With the increase in duty, the margins of smugglers have also increased, and this will tempt them to spend more and take extra risk, find new avenues to bring more gold in India, explained one source.
According to the Gold Survey for 2018 by the GFMS, “(About) 154 tonnes of gold are estimated to have entered the country through unofficial channels in 2018 compared to 134 tonnes in 2017.”
The report also had this to state: “Unofficial supply increased with gold coming through the eastern, north-eastern and western regions of the country, with small- to medium-sized jewellers selling such gold. Anecdotal evidence also showed that some gold entered from Singapore. We learnt that 24-carat gold lands in Singapore, where it gets melted into rough chains (weighing up to 200 gm), and is then smuggled into India. This gold is then converted into small bars that are sold in the market.” Gems and jewellery exporters Feel that with import duty rising, exports from domestic tariff areas will be impacted as exporters will face increased cost of working capital. Exports from the domestic area was $3.32 billion against total exports of $39.68 billion.