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Smuggling of Tola Bars in Kolkata: Unearthing the truth

Kolkata – the gold ornaments hub of the eastern region – bears witness to the import of a huge amount of gold via unofficial channels. Sandhya Sutodia takes a bird-eye view on the industry to ferret out the reasons behind such illegal means. 

Standing at around 250 kilograms per day, imports grab a lion’s share in what may describe meeting the staple diet of the yellow metal for Kolkata. It has been estimated that gold lovers in the city have started importing around 65 per cent of the metal without paying customs charges, mostly to avoid the rise in import duty currently pegged at 10 per cent.

While till last year when the import duty was about six per cent, around 40 per cent of the gold was imported through illegal channels.

“This move by the traders and the smugglers alike is inflicting a loss of around Rs 60 lakh everyday to the West Bengal’s exchequer under the one per cent value added tax (VAT),”

said Harshad Ajmera, proprietor, JJ Gold House.

On the other hand, when 40 per cent of 250 kgs were imported through illegal channels, West Bengal suffered a loss of around Rs 40 lakhs everyday.

Abdul Barik Biswas — brother of Golam Biswas, a Trinamul leader in Basirhat being tagged as an “active member” of a smuggling racket is another icing on the cake for the state government. Though TMC leaders have tried to distance themselves from Barik Biswas.

The increased import duty to 10 per cent and price difference with the international market have encouraged smuggling and the income generated from these activities is used in funding various illegal activities,Manoj Seth a gold expert said.

“Traders save around 11.12 per cent of the levy, including 10 per cent import duty and the remaining as VAT,”

he added.

Gold biscuits weighing 116.64 grams, which were not in circulation since a decade have started making their way to the Kolkata market from countries like Nepal, Sri Lanka and Bangladesh.

Officially, only around 100-110 kgs of gold is officially imported from Dubai, Singapore, South Africa and Australia and other markets, according to sources.

In gold smuggling cartels have slowly become active again.

A Directorate of Revenue Intelligence(DRI) official also agreed that there has been a huge spurt in gold smuggling since hike in import duties in August 2013 to 10 per cent.

From an import duty of Rs. 22,000 a kg, it has now shot up to nearly Rs. 3 lakh a kg, accounting for the customs duty and tax.

The larger amount of contraband gold is coming in from the United Arab Emirates, Thailand and Singapore but they are mostly routed through Bangladesh, he said.

Pankaj Parekh, vice-chairman, the Gem & Jewellery Export Promotion Council (GJEPC), said,

“When import duty was two percent, illegal import was not much. But when it was increased to four per cent, it was a viable business and now with six per cent import duty, it had become a lucrative business. And with 10 per cent it knows no limit. Gold smuggling leads to illegal activities and GJEPC is against all these.”

Chandra Surana, owner of Bhuramal Rajmal Surana Jouhree, said that government should come up with a policy framework and discourage gold smuggling.

Guinea Emporium partner Bablu De said that gold imported through illegal means must be stopped.

The UPA II government wanted to curb gold imports to check the ballooning current account deficit (CAD) that touched a record high of 6.7 per cent in Q3 of fiscal 2012-13. India’s gold imports stood at $42 billion in April 2012 to January 2013, contributing massively to the CAD, gold analysts said.

“The government was clearly anti-gold,”

De added.

Differing from others views, Kamal Parekh, an equity consultant said,

“Since investment in gold is virtually non-productive, it is a welcome step to increase the duty so that CAD can be reduced. However, smuggled gold will always be there even if import duty is decreased.”

The fact is that the crash of financial institutions has shaken the investors. The only asset class was found to be gold in the last 4-5 years and gold gave more than up to a double digit return till the year 2012. But last year in the year 2013 and in the current year, gold has lost its sheen among the investor class, he noted.

In 2011, India imported around 969 tonnes of the yellow metal and the official gold import went down in consecutive years of 2012 and 2013.

As smuggling rears its ugly head again, customs officials and the DRI are keeping a close watch on gold entering Kolkata, sources said.

However the gem industry is hopeful and the players believe that the new BJP government who is pro-industry and growth and development would decrease the customs duty.

Siddhartha Sawansukha, managing director, Sawansukha Jewellers said:

“On the first day of office the government has laid propositions to check on black money. This leads us to believe that the government will definitely come up with ways to check the illegitimate means of bringing gold into the country.”

Harshad Ajmera said going forward, the government should allow the 28 banks to import gold, abolish 80:20 rule and decrease customs duty to four per cent. It is only then that the smuggling issue can be addressed.

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