The move is expected to curb smuggling of yellow metal to India due to price differences
KATHMANDU, AUG 27 -The government has planned to hike the import duty on gold in a bid to curb possible smuggling to India due to higher prices there. “We are working on a proposal to jack up the duty which we will send to the cabinet this week,” said Rajan Khanal, joint secretary at the Finance Ministry.
Nepali gold traders have been urging the government to raise the import duty from Rs 4,400 to Rs 5,000 per 10 gm after India increased the duty to 10 percent on Aug 13.
“We will propose a tariff which will keep our prices slightly higher than in India,” said Khanal. India has fixed the customs duty at Rs 4,480 per 10 gm. Nepal increased the customs duty from Rs 3,000 to Rs 3,600 per 10 gm through the budget for the current fiscal year unveiled last month. The difference in import taxes between Nepal and India has made gold cheaper in Nepal by Rs 880 per 10 gm.
The Federation of Nepal Gold and Silver Dealers Association (Fenegosida) said the government should fix the customs duty so that gold is dearer in Nepal by around Rs 1,000 per tola (11.664 gm) to prevent possible smuggling to India and aggravating a shortage in the local market.
Banks supply 15 kg of gold daily to the local market. The shortfall is made up by illegal imports from China. The local market consumes around 30 kg of gold during normal times. The government is planning to increase the supply by 5 kg during festival season when demand surges, said dealers.
“The possibility of the gold supplied by banks being smuggled is low as traders get it in low quantities,” said Mani Ratna Shakya, president of Fenegosida. He added that higher prices in India mean the precious metal flowing south leading to shortages in Nepal.
The recent seizure of 35 kg of contraband gold brought from China and 10 tolas of gold being confiscated from two Indian nationals in Mahottari point to the direction of the illegal trade. Normally, the yellow metal is smuggled to India for two reasons -- the higher prices there and as a way of earning Indian currency.
A dealer said that a smuggler importing gold illegally from China makes a profit of over Rs 360,000 per kg by evading taxes, and if the same gold is smuggled to India, the smuggler can earn another Rs 350,000 per kg.
Meanwhile, gold prices on Monday rose Rs 500 to Rs 58,900 per tola due to the double whammy of a stronger US dollar and a price hike in the international market. Gold traded at Rs 58,400 per 10 gm in the local market on Sunday.
Gold prices started to soar last week hitting customers planning to buy gold for the approaching festivals. Fenegosida said that gold prices went up US$ 16 per ounce in a week on the world market. It added that the exchange rate of the Nepali currency rose Rs 3 to Rs 103 per dollar further pushing up gold prices.
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