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'Further Hike In Gold Import Duty May Be Counter-productive'

By Religare

More hike in the import duty on gold would be "counter-productive" and may lead to increase in smuggling activity, a senior Commerce Ministry official said as per the PTI report.

"There is already a high duty (on gold imports) now so doing higher and higher import duties can in fact become counter-productive, more smuggling avenues etc and that is why we do not want to try and take further aggressive measures from our end," Additional Secretary in the Commerce Ministry Arvind Mehta said.

'Further Hike In Gold Import Duty May Be Counter-productive'
He was replying to a question whether the government is considering increase in the gold import duty on account of huge jump in the imports in December 2015.

After recording decline, gold imports more than doubled to USD 3.80 billion in December, driven by dip in global prices.

On increase in imports, Commerce Secretary Rita Teaotia said the Finance Ministry would take a view on putting any kind of "control" measures on the imports.

She said the Commerce Ministry has not send any kind of recommendations to its finance counterpart.

"Whatever (gold) is coming, it is going into manufacturing" and products are getting exported or sold in the domestic market, she added.

She said the gold imports duty is an "issue which the Finance Ministry will take a call and as far as Department of Commerce is concerned, we have not made any recommendations".

She added the country's overall trade deficit is comfortable and "there is not too much pressure due to the gold imports at this point of time".

Trade deficit during April-December this fiscal narrows to USD 99.2 billion as against USD 111.6 billion in the same period previous year.

Further, Mehta said that the ministry is watching the situation as the Finance Ministry has done some amount of gold monetisation.

"What we are hoping is that at some stage some of those mechanisms kick in and the demand for gold goes down...," Mehta said.

In fact the gems and jewelery sector is demanding cut in the gold import duty as the sector's exports is declining. It dipped by 7.75 per cent to USD 2.46 billion in December. There is a 10 per cent duty on gold imports.

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