Gold imports in 2013-14 are expected to fall by 20 per cent following a steep hike in import duty to eight per cent and measures taken by the Reserve Bank of India to restrict imports.
The import duty in India is one of the highest in the world.
With the duty gone up by two percentage points, customs duty collections on gold imports will be higher by 60 per cent, or $2.9 billion (Rs.16,382 crore) this financial year against Rs 10,300 crore in 2012-13.
“The government took an unwarranted step of increasing duty as it adds the cost of jewellery. With hike in duty and other measures, import this year is expected to come down by 20 per cent,” said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation.
He has suggested measures to curb investment in gold by asking banks, post office, etc to discourage the sale of coins and bars.
Apart from individuals, corporates are also big investors in gold in the form of exchange traded fund, he added.
China, another major gold importer, has no import duty on gold. Taiwan also does not attract any duty, but South Korea has three per cent duty.
With eight per cent duty on imports and a cess, it comes to 8.24 per cent and one per cent value-added tax will be added.
Besides, one per cent TCS (tax collection) at source is applicable on cash sale.
“This will incentivise a rise in gold import from illegal channels in the country,” said Prithviraj Kothari, managing director, Riddisiddhi Bullions.
He said one kilogram of smuggled gold into India, where the bar has a size similar to an I-Phone, would yield $4,160 (Rs. 2.4 lakh).