Gold smuggling seems to be on the rise as seizures by the Customs Department has doubled in one year.

According to data compiled by the Directorate of Revenue Intelligence (DRI), the total quantity of gold seized by the Customs in 2017-18 was 3,223 kg valued at ₹974 crore, an increase of 103 per cent from 1,422 kg valued at ₹472 crore seized in 2016-17.

Unofficial estimates suggest that seizure forms any thing between 5 and 10 per cent of the total illegal trade. Considering this, smuggling of gold could be up to 30 tonnes during the last fiscal with a value of over ₹9,000 crore. The agency is taking all steps to check innovative ways of smuggling.

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According to the publication ‘Smuggling in India Report 2017-18’ by DRI, a large part of the domestic gold market is being served by the illicit smuggling of gold. Majority of seizures made by the DRI has been those imported through India’s land borders in cities such as Kolkata, Mumbai, Chennai and Delhi, which are high consumption centres of smuggled gold.

Land borders

Large quantities of smuggled gold reaches Kolkata from India’s land borders with Myanmar and Bhutan and is then transited to other metropolitan cities. In terms of the State-wise seizures by the DRI in 2017-18, the maximum number of seizures were made in North-Eastern States, followed by Delhi, Tamil Nadu, Karnataka, and Maharashtra. Bulk cash smuggling has also increased exponentially in 2017-18. The Customs seized foreign currency worth ₹89 crore primarily from prominent airports like Delhi, Mumbai, Kolkata, Chennai and Ahmedabad. Smuggling of foreign exchange is used to fund purchase of contraband goods such as gold, electronics and garments abroad, which is then smuggled into India. It is also used as a remittance for undervalued imports into India.

Cash smuggling increases the returns of organised smuggling syndicates as physical movement of foreign currency saves the commission (3-5 per cent) payable on hawala transactions, the report mentioned. According to a report by FICCI, outright smuggling as defined by the DRI is “the secret movement of goods across national borders to avoid Customs duties or import or export restrictions.”

Non-declaration (where no product is declared at port of entry) as well as not being in possession of any legal import documentation can also be considered as outright smuggling. But, smuggling could also take place through legal channels of trade by various means to evade Customs duties and other taxes applicable on such goods and products. This is referred to as technical smuggling and such goods are liable for confiscation under Section 111 of the Customs Act 1962. Ways and means of technical smuggling may be classified into four categories based on seizure data of DRI which include undervaluation, mis-declaration, misuse of end use and other notifications and other means.

Import duty

The main reason for smuggling are the duties. At present, import duty (technically known as Custom Duty) on gold is 10 per cent apart from GST (Goods & Services Tax) at the rate of 3 per cent. Once gold is smuggled, there will be price arbitrage by at least 10 per cent for the persons bringing gold.

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