Smugglers find new ways to bring in gold as price, import duties go up

In 2023, according to official statistics, gold smuggling cases in the country surged over 20 per cent year-on-year till October, with 4,798 documented cases involving seizure of 3,917.52 kg of gold. This is the highest number of gold smuggling cases in at least three years, though the year-on-year surge in cases is lower than the 62.9 per cent year-on-year growth seen in the post-pandemic year of 2022, when 3,982 cases of gold smuggling were recorded involving seizure of 3,502.16 kg gold. In 2021, around 2,445 cases of gold smuggling were recorded and 2,383.38 kg of gold was seized.

A closer examination of the data also reveals a peculiar trend — Maharashtra has pipped the traditional top-ranking state, Kerala, to register the highest number of cases of gold smuggling and seizure of smuggled gold till October this year.

As of October this year, Maharashtra recorded 1,357 cases of gold smuggling and seizure of 997.51 kg. This was followed by 894 cases and 498.84 kg of gold seized in Tamil Nadu; and 728 cases and 542.36 kg of gold seized in Kerala, official data shared by the government in Parliament showed.

The gold smuggling cases in Kerala in the first ten months of the year are lower than the 1,035 cases recorded in 2022.

Together these three states — Maharashtra, Tamil Nadu and Kerala — accounted for over 60 per cent of the total gold smuggling cases registered in the country so far. In 2022, they accounted for a lower 52 per cent of the total gold smuggling cases.

Gold smuggling in most states has already breached the levels of smuggling seen in the last three years. Telangana, Andhra Pradesh, West Bengal, Gujarat, Dadra and Nagar Haveli, and Daman and Diu have seen an increase in gold smuggling cases in 2023.

Top five regions with gold smuggling cases. (Express)

Experts say the rise in gold prices and high import duties are among the key reasons for the increase in gold smuggling cases.

According to the World Gold Council (WGC) report in May this year, gold jewellery demand was the weakest for the first quarter (January-March 2023) in India since 2020. The rise in gold prices has also encouraged a “rise in smuggling activity, incentivised by an avoidance of import duties”, the report said. This has reportedly encouraged demand in smaller cities, and among independent retailers, where cash purchases are more commonplace,” it said.

Gold prices have risen by over 11 per cent in the last few months, hitting a record level of around Rs 64,460 per 10 grams last week. To offset this weak demand, which comes amid the high gold prices, jewellers have been offering discounts after the festival season.

The government had also hiked import duty on gold last year. With effect from July 1, 2022, the basic customs duty rate on gold was increased to 12.5 per cent. Along with Agricultural Infrastructure Development Cess (AIDC) of 2.5 per cent and Integrated GST (IGST) rate of 3 per cent, the overall tax rate on gold imports works out to 18.45 per cent.

After the increase in import duty, gold imports registered a 24.15 per cent decline to $35.02 billion in FY23, but have surged significantly in recent months. In October, gold imports jumped by 95 per cent year-on-year to $7.23 billion. During April-October, gold imports have cumulatively risen by 23.01 per cent year-on-year to $29.48 billion.

To deter smuggling of gold, the Customs field formations and Directorate of Revenue Intelligence (DRI) take operational measures such as passenger profiling with the aid of Advance Passenger Information System (APIS), risk-based interdiction and targeting of cargo consignments, inspection, rummaging of aircrafts and coordination with other agencies, Minister of State for Finance Pankaj Chaudhary said in Rajya Sabha on Tuesday. “Field formations are regularly sensitised to new methods of smuggling,” the minister said.