The All India Gems and Jewellery Trade Federation feels that the increase in duty on gold was encouraging illegal import and smuggling of the yellow metal.
Mohanlal Jain, Director of the Federation, said that duty on gold has been increased from one per cent in January 2012 to 8 per cent in June 2013. “This has encouraged illegal imports in large quantities, which the Government is least concerned. And at no time has gold consumption reduced by increasing customs duty,” he told press persons here today.
On the RBI notification that import of gold will be permitted against hundred per cent cash margins and no gold on consignment will be permitted, he said this was causing shortage of gold, which in turn was encouraging hoarding by certain elements in the industry. “We are beginning to feel the shortage in the market, which is only going to increase,” he pointed out.
“When we cannot control consumption and we stop or regulate official supply of gold, this will concert the industry from tax compliances to forcefully supporting the grey market supplies, thus encouraging hawala and currency devaluation,” he said.
The Federation has made a plea to the Government to capitalise on the gold holdings in India through a gold bond scheme that can earn annual interest to the people and return them their asset after ten years. It is estimated that Indians hold close to 25,000 tonnes of gold, which in value terms is about $1.25 trillion, more than 50 per cent of the Indian economy.