Jewellers & bullion traders spar over gold import duty
The All India Gem & Jewellery Trade Federation (GJF) has sought the duty to be reduced to 4% from 10% in the upcoming budget. The India Bullion & Jewellery Association (IBJA), by contrast, says that any reduction will require New Delhi to put in place a compensation mechanism for sovereign gold bond investors who had factored in the 10% duty while buying the instrument.
Nitin Khandelwal, GJF chairman, said that the duty was levied to curb the current account deficit (CAD). "But CAD is under control now. On the contrary, gold smuggling has gone up due to high import duty," he said. The World Gold Council has pegged smuggled gold in the range of 100-120 tonnes in 2017.
"The commerce ministry has often suggested reducing the gold import duty to 4% to curb the smuggling of gold. Lowering the duty structure will not only boost customer demand, but also help the industry become more organised and compliant," said Khandelwal.
But Surendra Mehta, national secretary of IBJA, said that the government is unlikely to reduce the import duty on gold.
"Sovereign gold bonds have been issued to investors at a rate that includes the import duty of 10%. What would happen to investors now if the government were to reduce the duty suddenly? In that case, the government will have to work out a mechanism to compensate the investors," Mehta said. Bonds under the scheme earn an interest of 2.5% a year, payable every six months.
The industry has also urged the government to exclude gold in any form in Free Trade Agreements until import duties are brought on a par. If not, the government should impose import duty of 15% on gold articles, it said.
