by Moiz Mannan
While the Indian authorities appear to be totally confused over measures to curb gold imports, the Indian gold trade as well as visiting non-resident Indians (NRIs) are having to bear the brunt of frequently hardening regulations.
The curbs were introduced last year in an attempt to rein in the ballooning current account deficit (CAD). Introducing the 80:20 formula for the domestic trade was one measure adopted. That is, 20 percent of all bullion imported to Indian would mandatorily have to be exported.
The other step, apparently to control smuggling by visiting NRIs, was to give them a bit of a fright at the customs by having them sign a declaration of how much gold and currency they were carrying if the quantities exceed permissible limits. Further, the charges on the dutiable quantities were hiked from around two per cent of the value to more than 10 per cent.
Earlier this year, the Revenue Department introduced new forms at the customs. The new form — ‘Indian Customs Declaration Form’ — replaces the existing immigration form, which all Indian passengers entering the country had to fill up.
The new form specifically lists gold and other materials including Indian currency that the passenger needs to fill up. It requires incoming passengers to declare currency at the customs if the value exceeds Rs10,000.
With the introduction of the new form, all passengers also have to specifically declare, prohibited goods and dutiable items, including gold bullion and gold jewellery exceeding the free allowance. The free allowance for gold is Rs50,000 for men and worth Rs100,000 for women.
A recent circular of Revenue Department notifies that the new receipt of baggage rule includes new fields with item-wise list of gold jewelleries along with the printed serial number on gold bars to be filled by the passengers. The rule also tightens the requirement of knowing the background of such passengers with gold that exceeds the limit as well as the source of funding for gold.
There will be field officers authorised to check on the payment of import duty in the foreign currency and to know the source from where by whom the tickets have been booked and like. The tightening of baggage rules according to the revenue department has been put forward to avert the misuse of gold import in India so as to axe the current account deficit.
It has been reported that smugglers have been hiring eligible passengers or NRIs to import gold to India for which they are even providing them with flight tickets.According to normal rules, NRIs who stayed abroad for at least 6 months are permitted to bring up to 1kg of gold to India legally by paying 10 percent import duty. The new baggage rule is expected to put a control on the growing incidence of smuggling.
According to official statistics made available by the World Gold Council’s India official, gold imports declined 63 percent year-on-year between July and October.
Indians imported 38 tonnes of gold in January, as compared to a low of three tonnes in August last year. In December, gold imports rose to 25 tonnes, higher than the 19 tonnes shipped into the country in the previous month.
The increase in imports has been attributed to a rise in domestic demand from the start of the year, as well as more export orders and imports by non-resident Indians.
Traders were quoted in the media as alleging that the confusion over the Reserve Bank of India’s (RBI) 80:20 scheme persisted, leading to higher imports in December with jewellers readying for the marriage season in January, given the lull in the preceding months.
Gold imports touched a low of 3.38 tonnes specifically in August 2013, after the RBI came out with the fresh norms for gold jewellery exporters. Gold traders are of the view that the curbs had nothing to do with the decline in current account deficit.
Overall, the current account deficit has come down by nearly 55 per cent, and imports by nearly 30 per cent. The RBI mandate that at least 20 percent of the imported gold be kept aside for re exports has led to a crash in purchases from overseas. In value terms, bullion imports dropped almost 40 percent to roughly $27bn during the April 2013 to January 2014 period. The plunge in raw material imports has driven down exports of gold jewellery, medallions and coins by a half to just $15.60bn in the April to January period.
Reports quoting a Thomson Reuters GFMS Survey estimated that at least 150 tonnes of gold could be illegally imported into the country annually. The question being raised it that whether the new measures will really help the authorities curb this. Industry experts feel that at best the new form will increase the monitoring but only a reduction in customs duty and an increase in the allowance would be effective.
Finance Minister P Chidambaram has told the media after presenting the annual budget for 2014 that the government could look into easing restriction on gold imports into India. Meanwhile, the Bombay Bullion Association announced their decision to begin shutdown on March 10 to protest the hiked gold import duty by suspending operations across India.
Indian jewellery associations had made several requests earlier to ease the currently hiked gold import duty from 10 percent to the original 2 percent.
The Peninsula
