New Delhi: The decision to cut "too high" import duty on gold will help in containing smuggling and boost the country's exports of gems and jewellery, CBIC Chairman Sanjay Kumar Agarwal said on Wednesday. In the last financial year, seizures of gold made by Customs formation and the DRI together were around 4.8 tonnes, up from 3.5 tonnes in 2022-23.
The Budget has announced a drastic cut in import duty on the precious metal to 6 per cent from 15 per cent.
The Central Board of Indirect Taxes and Customs (CBIC) Chairman said that the duty was hiked in July 2022 as at that time there was a worsening current account deficit (CAD) due to the geo-political situation.
To cut down on the non-essential imports, the duty was increased.
CAD in 2022-23 was 2 per cent of GDP, which came down to 0.7 per cent in 2023-24. In the March quarter, it was a surplus.
"In that count the position is now better," he said, adding that "15 per cent is too high a rate of duty on gold".
Gold is the raw material used in the gems and jewellery sector where a lot of employment is generated.
He said that almost 50 lakh people are employed and exports are to the tune of 8 per cent from this sector.
"If the rate of duty remains very high that blocks the capital for manufacturing the jewellery and value addition that happens in the country," Agarwal told PTI.
He also said it was noticed that after the duty was hiked to 15 per cent, the importers resorting to bringing the gold in other than bullion form also under various free trade agreements (FTAs) to escape the levy ..
"This subterfuge was also resulting in not realising the full impact of the customs duty and we also noticed that there was a rise in smuggling of gold," he said.
With 15 per cent duty, there is a huge arbitrage between the domestic prices of gold and the international prices.
"All these factors kept in mind in the Budget proposal of reduction of duty on gold and precious metal where the duty move in tandem with the rate of duty on gold," he added.
The gems and jewellery exporters have been demanding for the last several years to cut duties on precious metals to boost exports and manufacturing.
In FY24, India imported gold worth USD 45.54 billion and silver worth USD 5.44 billion, while exporting jewellery worth USD 13.23 billion.
In volume terms, India normally imports 800-900 tonnes annually.
In 2022, India has raised its basic import duty on gold to 15 per cent from 10.75 per cent. India is the world's second-biggest consumer of the precious metal.
India fulfils most of its gold demand through imports and it puts pressure on the rupee and current account deficit.
Switzerland is the largest source of gold imports, with about 40 per cent share, followed by the UAE (over 16 per cent) and South A ..
The country's gems and jewellery exports dipped by 3.5 per cent to USD 7.26 billion during April-June this fiscal.
Source Name : Economic Times