The Kerala Gold and Silver Merchants Association (KGSMA) has urged the Centre to immediately review and rationalise the existing import duty structure on gold and silver, warning that higher duties are fuelling smuggling and hurting the legitimate bullion and jewellery trade. According to S. Abdul Nazar, State General Secretary of the association, government data presented in Parliament indicate a sharp rise in gold and silver smuggling following the increase in import duty on the precious metals from 6% to 15%. As reported by The Hindu BusinessLine, gold smuggling cases have increased significantly since the duty hike, while silver smuggling has witnessed an even steeper rise, with seizures increasing manifold.
The higher import duties have widened the price gap between international and domestic markets, making illegal imports more profitable. According to the association's statement, jewellers and bullion traders are forced to bear higher raw material costs while facing unfair competition from smuggled gold and silver. The situation has also led to a decline in legal imports, adversely affecting government revenue, as reported by The Hindu BusinessLine.
Despite intensified enforcement measures by the Customs Department and the Directorate of Revenue Intelligence (DRI) to curb illegal imports, the steep increase in import duty has created a strong economic incentive for smuggling. The association argues that history has repeatedly shown that excessively high import duties encourage smuggling rather than reduce demand, as reported by The Hindu BusinessLine.
The KGSMA has called on the Centre to rationalise import duties at a reasonable level to protect legitimate businesses and strengthen compliance in the sector. The association argues that a balanced and practical import duty policy would increase legal imports, improve tax collections, discourage smuggling and promote a healthier and more transparent bullion and jewellery market, according to The Hindu BusinessLine.
