The hike in import duties for gold, silver findings | Explained 

To bring duties imposed on gold and silver bars and findings at par, the Finance Ministry has standardised the customs duty imposed on the latter at 15%

The story so far: In a move towards standardisation and preventing the circumvention of duty, the Finance Ministry on Tuesday hiked import duties on gold and silver findings and coins of precious metal to 15%. This is inclusive of Basic Customs Duty (BCD), taxed at 10% of assessable value, and Agriculture Infrastructure Development Cess (AIDC) at 5%. Additionally, spent catalysts or ash containing precious metals would draw a total import duty of 14.35%. The new rates are effective from January 22. 

The primary endeavour is to standardise taxation rates, and thus prevent observed circumvention. Somasundaram PR, Regional CEO (India) at the World Gold Council (WGC) told The Hindu that the measure is to essentially plug a gap and bring duty on gold findings and coins at par with the overall customs duty rates on gold bars. “This will eliminate sections of trade taking advantage of duty arbitrage,” he said. 

Gold and silver bars are presently taxed at 15% of the assessable value. The revision places the import of the two metals in the form of findings (that is hooks, clasps and other components that are used in making jewellery) in the same slab. Thus, they seek to disincentivise indirect imports of the two metals with the objective of circumventing the higher taxation slab (as with bars before revision). As explained to news agency Reuters by a government official, the move was necessitated after a surge in imports of gold findings in the last two months. Notwithstanding the fact that it is the second-largest consumer of gold, India relies heavily on imports with scant domestic production. As observed in the Ministry of Commerce’s Trade Stat database, import of unwrought gold and/or gold in semi-manufactured (or powdered) form in October 2023 rose 95.41% on a year-over-year basis to $7.23 billion. This was in the run-up to the festive season. Furthermore, between April and October last year, imports rose 23.1% to approximately $29.5 billion. This was before a moderation was observed in November. Notwithstanding this, gold imports (for the period starting April 2023 to November) remained 21.1% higher on YoY basis.

Vipul Shah, Chairman at Gem & Jewellery Export Promotion Council (GJPEPC) explained to The Hindu that the 5% differential served as a significant incentive for importers who may look to import low-value crude findings with the intent of converting them into gold bars (through melting and refining). He stated that latest measure aims to curb such practices.

Observing that the import duty now stands equalled, Mr Shah further elucidates, “Findings are generally imported in lesser purity (18 carat or less) and duty shall be charged after converting the purity equivalent to 995 (fineness*) on which duty is levied while importing gold,” he stated, adding, “GJEPC believes that like gold bullion, the import duty should be levied based on the gold content of the findings in carats. Council has also represented on similar lines to the government,” he said.  

Import of gold draws custom duties under two heads, namely, Basic Custom Duty (BCD) and Agriculture Infrastructure Development Cess (AIDC). The latest revision will see BCD being charged at 10% of the assessment value and AIDC at 5%. The Social Welfare Charge (SWC) is not imposed on the commodity. At the final point of sale, that is to the consumer, applicable GST rates are levied on the landed cost.  

Basic Customs Duty is assessed on the final value of the goods imported. It is calculated based on the cost of the product, insurance and other freight-related expenses, all combined. AIDC is collected as an additional duty with a purpose for financing agriculture-relevant and other developmental infrastructure.