New gold smuggling hot spot: Meghalaya-Mizoram border | The Financial Express

New gold smuggling hot spot: Meghalaya-Mizoram border

Many passengers also bring in gold chains or ornaments in their baggages or wear them. But that is barely 5% of the total smuggled gold.

gold, smuggling
Another 25-30% is brought in through the airline route.

By Rajesh Bhayani

The Meghalaya-Mizoram border is emerging as the preferred route for smuggling gold into the country, with increased vigilance across the Nepal and West Bengal borders, which were the hot spots in the past.

An estimated 100 tonne of gold has been smuggled into India in the last six months, said sources in the know, and 60% of it is through the Meghalaya-Mizoram border.

Another 25-30% is brought in through the airline route. Many passengers also bring in gold chains or ornaments in their baggages or wear them. But that is barely 5% of the total smuggled gold.

“Post demonetisation, gold smuggling was subdued. However, due to rising import duty, 3% Goods and Services Tax and other factors have led to increase in smuggling,” said a source.  

The smuggled gold is sold at a 3-4% lower price than the cash market in Mumbai or at a discount of $80 per ounce. With demand low at high prices, the official market is also quoting a discount of $30 per ounce. Currently, the price of gold in international market is around $1,930 per ounce.

Experts say that the government’s hiking of import duty from 12.5% to 15% was primarily to curb gold imports at a time the rupee was on the decline. However, one of the main fallout of this has been rise in smuggling.  

Given the high 18% tax on the yellow metal (including GST), those controlling the clandestine gold import earns net 6-7% income after deducting 6-7% cost and 3-4% cost of selling smuggled gold at a discount in cash market. As a result, traders offer discounts of up to $70-80 per ounce in cash market while official market is quoting at a discount of $30 per ounce.

Chirag Sheth, principal consultant, South East Asia for Metal Focus, a metal research firm said: “The government should sharply cut gold import duty to discourage smuggling. The revenue loss on unaccounted trade is much more than probable customs duty revenue loss if duty is reduced.”

James Jose, former secretary of Association of Gold Refineries and Mints and MD, CGR Metalloys, Kochi, one of the large bullion refineries said, “As seen in the data of the past 12 years data (see table), gold import has always been in the range of 750-1,000 tonne per annum, irrespective of import duties or international gold prices.”

According to him, a hike in gold import duty and resultant increase in gold prices has not resulted in lowering consumption or imports, or a reduction in import duty and lower gold prices need not result in lower gold prices and subsequent higher consumption.

“Gold prices fluctuate 5-15% in a year and the impact of import duties get cushioned in these fluctuating gold prices. Unless and until the import duty is lowered significantly, to 5% from the present 15%, unofficial channels of gold supply will continue to be thrive,” he said.

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First published on: 28-01-2023 at 06:00 IST