For controlling the illegal imports, the import duty on gold should e cut down and the central government is planning for this. In the country, for a cut in import levy, the gold prices will decrease by as much as 8%.
Due to lower global oil prices, the trade deficit is falling and to reduce the duty on gold the government has the reason, informed by the source.
The Joint Secretary, commerce ministry, Mr. Manoj Dwivedi addressing a conference in New Delhi said that this decision (to reduce import duty) should be taken into the budget as now the current account deficit (CAD) is improving.
2% would be the ideal rate for the industry, said by the commerce ministry. Also, Dwivedi said that it can be brought down in a phased manner or in one go.
On this move, the traders of gold are delighted as this will check the smuggling.
In 2013, to check the demand and the increasing trade deficit, by India, the gold import duty was increased to 10%. The gold imports reduced by about 50%, so this year in June, the trade deficit fell to $12.96. After the duty was raised, gold smuggling has increased in the country. In 2016, the World Gold Council estimated that about 120 tonnes of gold were smuggled into India.
From present 10% to 2% the commerce ministry has proposed to cut gold import duties in one go or in phases as the trade is down and smuggling has been on a rise since the increase of duty. As per the traders, the gold prices will also come down by 8% if center allows this reduction of duty.
By a drop in duty jewelry sales will be pushed up exports will increase as well, said by the traders. As the gold price will be cheap, do the NRIs will not go to Dubai and other places to buy gold, they will also start buying from the country itself. As the benefit in smuggling would reduce, the smuggling activity would reduce also.
Since the demonetization happened in November 2016, smuggling of has surged since that time and further GST implementation, it was further increased. The 14% on Gold jewelry tax include After GST implementation is 14% on gold jewelry, which includes 10% customs duty, 3% GST on gold and 5% GST on making charges. So the gold becomes very expensive.