Malabar Group Chairman, MP Ahammed has urged the government to reduce import duty and GST on gold. He felt it would curb large scale gold smuggling, boost gold trade, strengthen consumer confidence and boost demand for gold and jewellery.
At present, gold attracts 12.5 per cent import duty and a 3 per cent GST. It works out to 15.5 per cent in levies. According to him, the total levy, including import duty and GST on gold, needs be reduced to 7 per cent.
Ahammed felt that such high taxes have led to large-scale smuggling and tax evasion. Therefore, reducing import duty-GST implication to 7 per cent is an effective measure to prevent those industry malpractices.
He also urged the government to enable provisions for introducing maximum retail pricing (MRP) mechanism in jewellery. According to him, jewellers may be allowed to sell their products without providing any pricing break-up in GST or other taxes. In a way, MRP-based billed transactions will make the jewellery retail trade tax-compliant and boost the government's tax collection.
While elaborating on his budget expectations, Ahammed said, "High import duty is the root cause of smuggling and tax evasion. The government must assess the adverse impact of higher import duty on the jewellery trade and propose duty reduction to make both trade and consumption of gold transparent. Slashing duty and GST on gold is in line with the government's move to curb unauthorized transactions in the trade. Bringing the jewellery industry under the Anti-Money Laundering Act's purview is proof of the government's effective decision-making. The trade expects similar swiftness from the concerned ministry to reduce import duty on gold."
The total incidence of levies on gold is around 20 per cent if one considers mining royalties along with the 15.5 per cent levy on account of GST and import duty.
According to him, several countries have reduced the import duty on gold to zero for curbing illegal imports. These include America, China, Singapore, New Zealand, Malaysia, UAE, Oman, Saudi Arabia, Qatar, Bahrain and Kuwait
Gold and diamond trade together accounts for 7.5 per cent of the country's GDP and 14 per cent of total exports. About 60 lakh people are employed in this sector.
"Reduced import duty would destroy the illegal gold trade spread across the country. This illegal trade is backed by an international smuggling lobby centred mainly in African countries," Ahammed said.
"To bring transparency in pricing, the government should set up a committee comprising government officials and members of the jewellers' associations which will set the board rate."