High import duty and restrictions are fueling smuggling and black marketing
The Government lost Rs. 6,200 crore in revenue from duties and taxes last year due to the sharp increase in smuggling of gold. In an interview with newspaper, Aram Shishmanian, Chief Executive Officer, World Gold Council said curbs imposed by the Government has led to 150-200 tonnes of gold being smuggled into India and a potential revenue of $1 billion was lost in terms of taxes. “The irony is the money would not be recovered in the years to come. Once into the grey market, the gold would remain there and never come into the legitimate trade,” he said.
That 200 tonnes of gold came in through the black market route means that regardless of the Government measures, gold demand continues in India and is growing gradually, he added. Last year, over 15 regulatory changes to curb gold demand were made by the Government. The changes caused a scare in the jewellery industry.
Any industry that has to respond to the changes is going to get grid locked, particularly with the 80:20 rule, said Shishmanian. In a bid to curb gold imports, the Government increased import duty to eight per cent, and the Reserve Bank of India made it mandatory for jewellers to export 20 per cent of their gold consignment before placing orders for fresh gold imports.
High import duty and other restrictions fuelled smuggling and black marketing industry. The scourge of smuggling, which was largely eradicated in 1991 when gold imports were liberalised, has come back with a vengeance. Therefore, policy makers need to consider the consequence carefully, he said.