Gold import duty may be reduced before GST rollout

Gold import duty may be reduced before GST rollout
The government may reduce import duty on gold before deciding on the levy on the yellow metal under the Goods and Services Tax (GST) regime. Policy think tank Niti Aayog is in talks with the Finance Ministry for reduction of import duty on gold.

The Niti Aayog is of the view that an import duty as high as 10% at present is not only a hurdle in jewellery exports, but has also given rise to gold smuggling.

Informed sources said the reduction in import duty may come ahead of fixing of tax rate on gold under the proposed GST to keep a tab on its prices.

While there is a four-tier rate structure for all commodities and services under GST, gold has been kept out of it. Finance Minister Arun Jaitley has said the levy on gold will be fixed separately.

Chief Economic Adviser Arvind Subramanian has been batting for a 12% GST rate on gold. If the government accepts his suggestion, the tax rate on gold including import duty could go well beyond 22%, severely impacting its consumption with Indian masses. Sources said the government is looking into Niti Aayog’s suggestion.

The import duty on gold was enhanced from 2% to 10% by the then UPA government in 2013 in the wake of a historical high current account deficit (CAD). The CAD has since come down, but the import duty has not been removed in the past nearly four years.

Sources in Niti Aayog said, it is not in favour of imposing an import ban on gold as a tool to tackle high CAD.

In its three-year action agenda draft too, the Niti Aayog has suggested bringing down import duty on gold to ensure small and medium firms get access to it.

“Reduction in customs duty will not only reduce incentives for illegal transactions but it will also help ensure availability of gold for small and medium firms, thereby increasing the share of gold jewellery produced by the sector," the Aayog said in the action agenda made public late last week.

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