Gold price is likely to go up in the domestic market as the government is being pushed to hike import duty on precious yellow metal following the Indian government´s decision to raise customs duty on imports of gold.
The Indian government, through budget speech on Friday, hiked basic customs duty on standard gold bars, over 99.5 percent pure gold coins and platinum from 2 percent to 4 percent, citing widening current account deficit triggered by “growth of almost 50 percent in imports of gold and other precious metals in the first three quarters of this year”.
The latest change in tax rate means Indian importers will have to pay IRs 1,080 (Rs 1,728) while bringing in every 10 grams of gold which is lower than Nepal´s Rs 1,500. This has raised chances of smuggling of gold from Nepal to India through porous borders.
“To prevent this we have already asked the Ministry of Finance and Nepal Rastra Bank to revise customs duty so that illegal traders cannot take benefit of the change in India´s customs tax rate,” Tej Ratna Shakya, president of Nepal Gold and Silver Dealers Association, told Republica.
Although he is yet to make a formal request in this regard, Shakya said Nepal government should raise customs duty by at least 50 percent. “This change will ultimately make gold pricier in the country,” he said.
Around 13 years ago when Nepal´s import duty was two percentage points lower than India´s 10 percent, Nepal imported up to 134 tons of gold in a year, whereas annual domestic demand at that time was only 15 tons. Most of this gold, traders claim, entered India illegally.
“The possibility of return of such a trend cannot be ruled out if changes to customs duties are not made immediately,” Shakya said.
The government in February raised imports duty on gold to Rs 1,500 per 10 grams following the Indian government´s announcement to raise the tax to IRs 540 on imports of every 10 grams of gold. Similar adjustments were made in the past as well.
The government has currently given permission to release 20 kgs of gold per day in the market. This amount of gold is distributed by 13 commercial banks on rotation basis. from myrepublica.com
