CBIC Chairman focuses on Gold import duty under FTAs cut in Union Budget 2024

NEW DELHI : A surge in imports under free trade agreement, lower current account deficit and a spate in smuggling prompted the Union Budget to slash duty on gold from 15 percent to 6 percent, according to Central Board of Indirect Taxes and Customs (CBIC) Chairman Mr. Sanjay Kumar Agarwal.

“During the period that the import duty on gold had gone up, we noticed that gold imports under certain Free Trade Agreements (FTAs) had gone up. In addition to that, smuggling was on a rise. Due to all these factors, we decided to reduce the import duty on gold,” Mr. Agarwal told in an interview after the Union Budget 2024-25 was tabled on July 23.

There has been a sharp increase in gold imports largely because of duty concessions provided by India to the UAE under the Comprehensive Economic Partnership Agreement. India’s imports of gold and silver from the UAE surged 210 percent to $10.7 billion in FY24, according to economic think tank Global Trade Research Initiative (GTRI).

As far as smuggling is concerned, in 2022-23, the Indian authorities seized 3,800 kilograms of smuggled gold. India’s customs department seized 2,000 kg in the first half of 2023-24, 43 percent more than the haul a year back.

In July 2023, the basic customs duty on refined gold bars was increased to 12.5 percent along with maintaining the Agriculture and Infrastructure Cess (AIDC) at 2.5 percent​. The government had on January 22 increased the import duty on gold and silver findings, used in making jewellery, and on precious metal coins to 15 percent to bring them in line with duties on gold and silver bars.

“The import duty was increased in July because of the geopolitical situation, international prices of petrol had reached a level that was impacting the current account deficit (CAD),” he said.

The CAD is now seen as improved. For April-December 2023, it stood at 1.2 percent of the GDP, down from 2.6 percent in the same period of the previous year.

“Gems and jewellery sector is important for exports, it contributes to 8 percent of India’s total exports. It was important to provide that environment to the sector,” Mr. Agarwal said.