Calcutta, July 7: Finance minister Pranab Mukherjees decision to double import duty on gold is likely to fuel smuggling and the recycling of the precious metal. The decision may also lead to a drastic fall in the import of the yellow metal this year.
This could lead to additional smuggling, especially during the periods of high demand in the festive season, World Gold Council MD (Indian subcontinent) Ajay Mitra told The Telegraph.
The difference in price between imported gold and domestic gold has widened to 3 to 3.5 per cent (per 10 grams) because of the additional taxation.
Rates were fixed in 2004 and have not been reviewed even as the price of gold has increased manifold, Mukherjee said yesterday.
The enhancement in customs duty will marginally increase the price of jewellery, said Vinod Hayagriv, chairman of the All India Gem & Jewellary Trade Federation.
According to local traders, recycled gold could increase to 250 tonnes this year against 200 tonnes in normal years as more people could be selling gold during rallies.
Mitra said the Rs 100 duty has been applicable since 2004, when the gold price was Rs 5,800 per 10 gm, and import duty was 2 per cent of the gold price. After this increase import duty as a percentage of the gold price is 1.4 per cent. Gold imports during January to June were about 59.8 tonnes, down 57 from 139 tonnes a year ago.
Gold (24 carat) was sold at Rs 14,860 per 10 gms today compared with Rs 14,800 yesterday in Calcutta.