New Delhi is considering rescinding its recently increased import tax on gold to stop illegal inflows of the metal, Bloomberg reported Monday citing sources. According to the report, the Ministry of Commerce plans to reduce the current levy from 12.5% to 10%. The milestone could be announced during the budget presentation expected early next year, or sooner, the sources said.
India raised the tariff on gold imports from the previous 7.5% in July. The measure was aimed at reducing metal inflows to stabilize the Indian currency. The rupee suffered a record drop at the time due to high inflation and trade imbalances. After the rise, India’s gold imports fell 23% in July-September year on year, according to data from the World Gold Council.
However, warnings of increased smuggling began arriving almost immediately after the tax was introduced, with many urging the government to reconsider the decision. Experts say a higher import tax poses a challenge for India’s gold industry as it increases the volume of goods entering the country unofficially.
“The duty should be between 4% and 6%, where the government will also get sufficient revenue and the illicit trade will not be there either.” Ashish Pethe, chairman of the Mumbai-based business group, told the outlet.
India is the second largest consumer of gold in the world after China, its imports being largely driven by the jewelry industry. India imported 651.24 tonnes of gold in the 2020-21 financial year, according to the Ministry of Commerce and Industry. These imports were worth $34.62 billion and have already increased by 33% to $46.14 billion in 2021-22. Meanwhile, the country’s Directorate of Fiscal Intelligence (DRI) on Monday said it had seized over 833 kilograms of contraband gold worth ₹405.35 crore ($49.5 million) so far this exercise.
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