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Gold Silver Reports (GSR) – The 2.5% hike in customs duty on gold and precious metals proposed by Nirmala Sitharaman may see a rise in smuggling and illegal sale of the yellow metal. Traders last week had rued that the quantity of smuggled gold sold in the black market was rising due to skyrocketing prices.
Prices touched an all-time high at ₹35,000 per 10g and about 25 tonnes of non-duty paid gold was sold in India between June 1 and 25, as compared to average sales of 15 tonnes illegal sales in a month.
Currently, gold attracts 3% Goods and Services Tax and 10% customs duty. With the hike of customs duty by 2.5%, the effective rate of tax on gold will go up to 15.5% and illegal sales may go up.
Read More: Budget 2019: Gold Custom Duty Increase 10 to 12.5%
“We expected a reduction in duty on gold considering disruption caused by spiralling prices. But the budget proposal to hike customs duty is a shock to both traders and consumers,” said S Venkatesh Babu, president, Bengaluru Jewellers Association.
On Friday, gold price went further up to touch ₹36,100 per 10g before climbing down to ₹35,800 and hovering around ₹36,000.
Experts fear that this will lead to an increase in illegal sale of gold.
“When the tax burden becomes too high, people tend to evade it and this won’t be helpful for the government to ensure compliance,” said BT Manohar, chairman of the taxation committee, Federation of Karnataka Chambers of Commerce and Industries. – Neal Bhai Reports (NBR)
