Gold import duty hiked to Rs 3,000 per 10gm

KATHMANDU, JAN 26 -

The government has hiked customs duty on the import of gold to control possible smuggling of the yellow metal to India. A Cabinet meeting on Thursday decided to increase the duty by Rs 700 per 10 grams to Rs 3,000, pushing the precious metal’s price up amid the wedding season.

“The new duty on gold import will come into effect immediately,” said Shanta Raj Subedi, secretary at the Finance Ministry.

The new hike makes the gold import duty in Nepal higher than that in India. The southern neighbour on Monday had increased the tax to IRs 1800 (Rs 2880) per 10 gram of refined gold .

After India hiked the duty, local gold dealers had demanded a rise in the tax in Nepal to discourage illegal export to India.

Whenever the price of bullion is higher in India, smuggling to the southern neighbour rises. Smugglers usually see two types of benefits — higher income by selling the gold and accumulation of the Indian currency (IC) which can be exchanged in bordering towns at the rate higher than that fixed by the Nepal Rastra Bank.

Local gold traders say the domestic market’s demand is also partially fulfilled by smuggled gold . The government, in the last two months, has confiscated 19 kg gold imported illegally from Khasa, China.

Bullion traders, however, said the hike in gold import duty may be insufficient to prevent the smuggling as smugglers can still benefit by selling the IC in the

black market.

“The price difference of Rs 120 per 10gm and the shortage of IC will continue to fuel smuggling,” said Tej Ratna Shakya, former president of the Nepal Gold and Silver Dealers Association. “The hike in duty by at least Rs1,000 per 10 gm would make some difference.”

Every time India increases the duty on gold import, Nepal faces pressure to adjust the duty to control smuggling. The government had last hiked the tax in May last year — from Rs 1,600 per 10 gm to Rs 2,300 — after India increased the tax to 4 percent.

Smugglers sell the IC earned from gold sales at the rate as high as Rs 168 per IRs 100. The NRB-set exchange rate stands at Rs 160 per IRs 100.

The duty hike, however, is unlikely to slow the demand amid the wedding season, according to bullion dealers. The domestic market presently demands 30-40 kg gold a day.

Source: The Kathmandu Post