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In a bid to remove the loophole of a tax arbitrage between different types of gold and silver items, the Finance Ministry on Tuesday raised import duty on gold and silver findings and coins of precious metals to 15 per cent. Higher imports of gold and silver findings — which are small components such as hooks, clasps, clamps, pins, screws used to hold the whole or a part of a piece of jewellery in place — led the government to hike the import duty for them at par with gold and silver bars.
Gold and silver bars faced a 15 per cent import duty, while gold and silver findings attracted 11 per cent import duty. Owing to this duty arbitrage, it was found that there was a significant surge in imports of gold findings in the last two months, a senior government official told The Indian Express.
The hike in import duty on gold and silver findings has come in the form of levy of Agricultural Infrastructure Development Cess (AIDC) of 5 per cent and removing Social Welfare Surcharge (SWS) of 1 per cent. The new duty rates became effective from Tuesday.
Earlier, gold and silver findings faced a 10 per cent levy of basic customs duty (BCD) and 1 per cent SWS, making the effective duty rate to be 11 per cent. Now, the government has levied AIDC of 5 per cent and removed 1 per cent SWS, while keeping BCD unchanged at 10 per cent and resulting in a total effective duty rate of 15 per cent. This brings it at par with import duty on gold and silver of 15 per cent. Similarly, coins of precious metals will also now attract a 15 per cent duty as against 11 per cent earlier.
The import duty on spent catalyst and ash containing precious metals has also been hiked to 14.35 per cent (including 10 per cent BCD and 4.35 per cent AIDC) from 10.09 per cent earlier (9.17 per cent BCD and 0.92 per cent SWS). This brings the import duty at par with gold and silver dore.
The hike in import duty has been done to bring in uniformity for import duty rates for all categories of gold and silver and precious metals as people were misusing the tx arbitrage to import gold/silver in different forms which faced lower duty than gold/silver bars. The government took note of a surge in imports of gold findings in the last two months to hike the import duty.
“To prevent circumvention of the higher duty of gold and silver bars, the rate on gold and silver findings have been equalised with gold and silver bars. Similarly, duty has been equalised for coins of precious metals. The import duty on Spent Catalyst of precious metals which was at 10.09 per cent have also been aligned with import duty on gold and silver dore to prevent possible misuse,” the official said.
Gold imports had jumped by 95 per cent year-on-year to $7.23 billion in October. During April-October, gold imports rose by 23.01 per cent year-on-year to $29.48 billion. In November, gold imports moderated rom the previous month to $3.45 billion, even as they remained up 6.24 per cent year-on-year. In December, gold imports jumped by a sharp 156.47 per cent to $3.03 billion compared to $1.18 billion in the year ago period. Cumulatively during April-December, gold imports have risen by 26.64 per cent year-on-year to $35.95 billion.
Rise in gold prices and duties are also seen as the key reasons for higher gold smuggling in the country. In 2023, according to official statistics, gold smuggling cases in India surged over 20 per cent year-on-year till October, with 4,798 documented cases involving seizure of 3,917.52 kg of gold. This is the highest number of gold smuggling cases in at least three years, though the year-on-year surge in cases is lower than the 62.9 per cent year-on-year growth seen in the post-pandemic year of 2022, when 3,982 cases of gold smuggling were recorded involving seizure of 3,502.16 kg gold.