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India's gold duty increase leads to a spurt in smuggling
By Deeptiman Tiwary
The Times of India, Mumbai
Tuesday, June 11, 2013
http://timesofindia.indiatimes.com/business/india-business/Gold-duty-hik...
NEW DELHI -- Days after the government increased duty on gold from 6% to 8% to curb its import, Customs authorities are already witnessing a spurt in smuggling.
In separate operations on Sunday, Customs authorities at the IGI Airport here held two men with over 2.6 kg gold worth close to Rs 70 lakh. While a man from Uttar Pradesh was arrested with gold worth over Rs 19 lakh, another person from Bhatkal in Karnataka was arrested with Rs 50 lakh of jewellery. Both were smuggling the precious yellow metal from Dubai.
The seizure also revealed a unique modus operandi, where the man from UP had converted the gold into silver-coloured pins and stapled them on the box of a television he was legally importing from Dubai. The man from Bhatkal had wrapped jewellery around his legs.
Sources said Customs had information about some gold being smuggled in from Dubai by the accused, identified as Abul Sattar of Muzaffarnagar in UP and Abdul Patel from Bhatkal. Based on the information, authorities apprehended Sattar as he alighted from the flight and was trying to pass through the Green Channel. The authorities found him carrying a TV with more than the usual staple pins on its box.
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When these pins were examined by a jewellery expert, they turned out to be gold. In all 109 silver-coloured staple pins, weighing 755 gm and valued at Rs 19.64 lakh, were recovered by the authorities.
"Had it not been for the specific information, we would have never suspected the pins to be made of gold," a senior Customs official said. "It's an example of how smugglers keep evolving with new modus operandi. We were expecting spurt in smuggling post the duty increase and so have increased surveillance."
In a similar operation, Patel was arrested as he alighted from the flight and a thorough search led to discovery of jewellery weighing 1.9 kg worth close to Rs 50 lakh.
Government in the past 1 1/2 years has increased the duty on gold from 2% to 8% to discourage its import, which has remained the main contributor to the current account deficit (CAD) of over 5% of the gross domestic product (GDP) in this fiscal year. This has led to a constantly falling rupee, now touching Rs 57 to a dollar. However, due to continued demand in the domestic market for cultural and investment reasons and spurred by falling prices of gold in the international market, the move has had little impact.
Reserve Bank of India data shows that while the average gold price in 2012 was 2.4 times that of 2008 at Rs.29,302 per 10g, demand was up by 1.6 times during the same period to 1,079 tonnes. In May 2013 alone India imported 162 tonnes of gold as compared to 142 tonnes in April this year.
The Directorate of Revenue Intelligence (DRI) had last year recorded a record 800% increase in gold smuggling. This has led to fears of more black money getting infused into the economy as increased import duty and other restrictions are put on gold.
"The government is less concerned about black money than it is concerned about rising CAD," a DRI official said. "Black money in any case is not being accounted into the economy. The government would rather have white money shift away from gold to give a spurt to economy."
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