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Gold imports can be reduced by 150 tonnes this year if the government makes mandatory one per cent tax at source and production of PAN for purchase of bullion in cash, jewellers suggested today.
Stating that a hike in import duty will not have desired results, the All India Gems and Jewellery Trade Federation (GJF) has come out with several recommendations to curb gold import.
"Hiking import duty on gold alone will not change the situation. Other measures are required to be taken to address current account deficit. Gold imports can be brought down by 150 tonnes to 600 tonnes this year by just applying TCS (tax collected at source) on purchase of bullion in cash and not on jewellery," GJF Chairman Bachhraj Bamalwa told reporters.
He noted that gold imports did not fall much in 2012 even after the government raised duty from 2 per cent to 4 per cent. Recently, duty has been further increased to 6 per cent.
Bamalwa said the country is estimated to have imported 750 tonnes of gold in 2012 and an additional 200 tonnes was believed to have been imported through unofficial channel, taking the total to almost 2011 level of 969 tonnes.
To reduce imports, he said, "Currently, one per cent tax is collected at source on jewellery sales and not on bullion.
Instead on jewellery, introduce TCS and PAN requirement on bullion sales happening in cash," he said.
Gold coins/bars are purchased for investment purpose, while jewellery is bought by end-users, he added.
Traditionally, India has been the world's largest consumer and importer of gold. Outflow of the foreign exchange on gold imports is impacting country's current account deficit, which has widened to USD 38.7 billion or 4.6 per cent of the GDP in the first half of the current fiscal.
GJF said government should discourage purchase and sale of gold through exchange traded funds (ETFs) and mutual funds and impose commodity transaction tax on gold and silver traded in the futures market.
It also recommended that gold reserves maintained against ETF and mutual funds should be put in use by channelising it through banks and jewellers.
Noting that Indian consumers are holding gold reserve of 15,000-25,000 tonnes, GJF asked the government to permit jewellers to pay in cash for gold sold by consumers. At present, they are allowed to pay only a maximum of Rs 20,000 in cash.
It also asked the government to allow big jewellers to operate gold deposit scheme,