The gold import bill in the first half of 2016-17 is estimated at $7.2 billion, a 10-year low, because of high import duties, stricter disclosure requirements for jewellery purchases, a strike by jewellers and government efforts to unearth black money.
Gold imports were much higher when international bullion prices were at their peak three years ago. Even a 10 per cent duty and an obligation to export 20 per cent of the imported gold had not squeezed imports this much.
Commerce ministry data suggests the gold import bill till August was $6.1 billion. Industry estimates peg the bill for September at another $1.1 billion.
Madan Sabnavis, chief economist, Credit Analysis & Research Ltd, said this was a good time to review the gold import duty. “The widening current account deficit is behind us. Also, the gold bonds are fairly successful. India has rolled back other controls since 2013. As a corollary, the duty burden should also be reduced,” he said.
The current account deficit in April-June narrowed to 0.1 per cent of the GDP, among the lowest in nine years, on weaker commodity prices. Five tranches of gold bonds have been issued and three of them have been listed. And the government has sold bonds worth nearly 10 tonnes of gold since November 2015 without importing the metal. The industry estimates 100 tonnes of gold may have been smuggled into the country in April-September because of the high import duty. The department of revenue intelligence (DRI) has increased seizures that have helped in curbing smuggling. But the “duty needs to be cut to 6 per cent at least to dis-incentivise unofficial imports”, the Indian Bullion and Jewellers Association has told the finance ministry.
The wholesale bullion dealers body, the Bullion Federation, has also asked the government to cut the duty. “The total duty stands at 12 per cent, consisting of 10 per cent import duty, 1 per cent excise duty on jewellery manufacturing, and a 1 per cent value-added tax,” said Chirag Sheth, consultant, Metals Focus, a bullion research firm. Metals Focus reckons a reduction of the import duty to 6 per cent will make it unprofitable to smuggle gold into India.
