Govt changes import duty valuation for gold and silver after Budget

New method aims to plug loophole that allowed importers to pay a lower duty.

The government has altered the rule for import duty valuation on import of gold and silver. A customs notification in this regard was issued on Saturday, a day after presentation of the Union Budget.

Earlier, the duty was based on tariff value. This has been changed to the actual value at which the selling bank bills these. Refineries which import dore (unrefined gold) will continue to pay duty as in the earlier method. 

Till now, the duty was according to the fortnightly tariff rate announced by the government, based on the past 15 days’ average price. Hence, at the time of import, the tariff value on which the duty would be charged was known. That gave scope for arbitrage – market players would calculate the next tariff value and wait for the last day of a fortnight or start of the next fortnight to price the sale, usually on a consignment basis. And, thus, try to pay a lower duty, irrespective of sale price. The tariff value was not changing daily, based on market price.

The new method is intended to plug that. “Tariff-based imports were of advantage to a section of players in the market. The new regulations bring a level playing field, as it will be based on actual sale value of imported or refined gold,” said an analyst.

If an exporter imports gold from a group company abroad for re-export, whatever valuation the selling company discloses will be the benchmark, giving scope for over or under-invoicing, speculated a banker.