Duty hike will pave way for illegal gold import, says industry.

The recent revision of duty on gold imports may ease the economic situation temporarily but will do more harm than good for the nation in the long-run, said All India Gems and Jewellery Trade Federation (GJF).

Duty on gold was raised from 1 per cent in January, 2012 to 8 per cent in June, 2013 and the industry feels this has led to illegal import of gold into the country.

“The additional 7% duty alone will amount to $3.6 billion every year of the $60 billion industry. Despite the revenues, the government wants to turn off the tap to the industry instead of regulating it,” Vinod Hayagriv, regional chairman of GJF and legal committee head for the forum said.

The trade body believes that the move will jeopardize the gold industry on the whole and will create uncertainties on the sustainability of the industry. “We would like to reiterate that any tough measures in the past, which put a premium on the domestic prices, will lead to influx of gold into the country through illegal channels, leading to heavy loss of revenue to the government and a strong effect on the rupee value,” said Jitender Agarwal, Director, GJF.

Agarwal added that the other ill effects of non-availability of gold to the industry will lead to rampant money making activity and resellers will enter the sector buying gold from banks and selling at huge premiums besides increasing black marketing.

Stating that RBI’s recent circulars stating import of gold will only be permitted against 100 per cent cash margins and no gold on consignment will be permitted, Sanjay Gupta, Director, GJF said it will paralyze the industry putting artisans out of jobs and manufacturers out of business.

“We would like to call it Suvarna Bachao Plan, where consumers would deposit idle gold to a nominated bank at an interest rate of 3.5%,” Hayagriv said. According to GJF, this move would help unlock nearly 18,000 tonnes of hidden gold in the country and the government can reduce import of gold and  save billions in foreign exchange and normalize current account deficit (CAD).

Source : newindianexpress.com