Gold import duties, smuggling and gold seizures

In February 2021, India's Finance Minister announced cut in import duties on gold from 12.5% to 7.5% albeit effective import duty remained 10.75% after imposition of various cesses, surcharges and a 3% GST.. ThePrint’s Editor-in-Chief Shekhar Gupta explains what the small cut in import duty tells us about the Indian political system’s fatal attraction for bad policy.



On 13 August 2013, the Indian government had raised gold import duty from 6% to 10% which was further raised to 12.5% on 5 July 2019. For taxes and gold import duties over 12.5% gold smuggling becomes a lot more profitable than imports creating a very strong incentive for the grey markets to constantly undermine all reforms to make gold liquid and mainstream according to the World Gold Council. India has had a significant history of seizure of smuggled gold which is directly proportional to the amount smuggled rising from 207% from 2016 to 2020. Nearly 70% of total gold seizures made in 2020-21 were of Myanmar origin. Only about 13% came from the United Arab Emirates.

According to Gupta, in the past, gold was smuggled in large quantities as it funded all of India’s underworld and corruption — bureaucratic corruption, customs corruption, judicial corruption as well as terrorism. “Gold is a sink for black money. One way to clean up gold was to open its imports. Second was to reduce or withdraw all duties so that the margin was taken away. And third was to improve India’s foreign exchange rules” Gupta explained.