M P Ahammed
Reduction of gold import duty from the present 10% to 6% has been a long-pending demand of the gems and jewelry industry. But every budget in the recent years overlooked it for some or the other reasons.
Given a number of measures by the government in the last two years, now the time however looks ripe for a decisive action on slashing the duty. We saw the introduction of Gold Monetisation scheme in November 2015 and the country woke up to a demonetisation initiative in November 2016.
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If the first measure was successful to a great extent in bringing the hoarded gold deposits back into the system, the second move had the intent to keep a tab on the parallel economy driven by illegal gold.
The initiatives thus had an impact on the imports of gold that fell down sharply. On the other hand, export of gold and diamonds from India cannot be affected due to these internal initiatives and this can be done only by incentivizing the imports. That cures a perfect pitch for a cut in import duty in the forthcoming budget.
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Lowering the duty structure will not only revive sagging customer demand, it will also uplift business sentiments for the trade and increase the offtake in the retail gold business.
The duty reduction measure also has the potential to act as a credible deterrent against hoarding of unaccounted funds by unscrupulous entities and expedite PM Narendra Modi's vision to rid India of the maladies of unaccounted money and tax evaders.
The government has indicated that there is no proposal under consideration to reduce import duty on gold. In a written reply to the Lok Sabha Minister of State for Finance Santosh Kumar Gangwar has ruled out any such proposal for gold import duty reduction. Having said that, the industry is keenly looking upto the Finance Minister to lower the import duty on gold to six percent from 10%.
It would really be great in the interest of the industry as it has been a long outstanding demand. Earlier the duty was just 1%; but the government increased it to 10%, thereby distorting the price parity between domestic and global prices.
The reduction in duty should happen not just in the interest of the industry, but also for the common good of the country as it will lead to fall in prices and thus benefitting the end customers.
Duty reduction is essential to stem the scourge of smuggling. It is said that about 600 tonnes of gold, which almost equal to our legal import of gold annually, change hands in London alone every day. Undoubtedly, a considerable traction of the same must be finding way to India through illegal routes and being parked as black money.
As per the estimates by World Gold Council, annual gold smuggling to India is at astounding 150-200 tonnes, causing huge revenue loss for the government. Smuggling is also a conduit for counterfeiters and hoarders of unaccounted money. If the government wants to fight against black money seriously, it has to arrest smuggling as well.
The duty reduction measure also has the potential to act as a credible deterrent against hoarding of unaccounted funds by unscrupulous elements and expedite PM Narendra Modi's vision to rid India of black money maladies.
We earnestly wish that the upcoming budget will take into account the genuine sentiments of the sector. What we expect are appropriate policy-decisions to reduce the import duty and other measures. We also hope that the FM will come up with suitable policy decisions and announcements in this regard.
M P Ahammed, Chairman, Malabar Gold and Diamonds