The Finance Ministry increased import duties on gold and silver coins and finds to 15% on Tuesday in an effort to close the tax arbitrage gap between various kinds of gold and silver commodities. Increased imports of gold and silver findings, which are tiny parts like hooks, clasps, clamps, pins, and screws that keep a piece of jewelry together or in place, caused the government to raise the import tariff on them to the same level as that of gold and silver bars. The import charge on gold and silver bars was fifteen percent, and the import duty on gold and silver findings was eleven percent. A senior government source informed The Indian Express that there has been a notable increase in gold imports over the past two months as a result of this duty arbitrage.
The increase in import duties on gold and silver findings has been implemented by the imposition of a 5% Agricultural Infrastructure Development Cess (AIDC) and the elimination of a 1% Social Welfare Surcharge (SWS). On Tuesday, the higher tariff rates went into force. Previously, the effective duty rate on gold and silver finds was 1 percent SWS and 10% basic customs duty (BCD). The government has now eliminated one percent of SWS and imposed a five percent AIDC, leaving the ten percent BCD unaltered. This results in a fifteen percent overall effective duty rate. This puts it in line with the 15% import duty on gold and silver. Similarly, precious metal coins will now be subject to a 15% levy instead of the previous 11%.
Additionally, the import tax on used catalyst and ash containing precious metals has increased from 10.09 percent to 14.35 percent (which includes 10 percent BCD and 4.35 percent AIDC) (9.17 percent BCD and 0.92 percent SWS). This puts the import tax on par with the dore of gold and silver. The increase in import duties was necessary to bring import duty rates for gold, silver, and precious metals into uniformity because individuals were abusing the tax arbitrage to import gold and silver in various forms that were subject to lesser duty than gold and silver bars. The administration increased the import duty after observing a sharp increase in gold discoveries over the previous two months.
An increase in gold smuggling in the nation is also attributed to rising gold prices and levies. As per the official figures, there was a 20 per cent increase in gold smuggling cases in India till October 2023, with a total of 4,798 verified incidents and the seizure of 3,917.52 kg of gold. Though the year-over-year increase in instances is less than the 62.9% year-over-year gain observed in the post-pandemic year of 2022, when 3,982 incidents of gold smuggling were documented involving the seizure of 3,502.16 kg gold, this is the largest number of cases of gold smuggling in at least three years.
