India May Cut Gold Duty to 6% from 10%

India, the world’s second-biggest consumer of gold, is said to be considering cutting the import tax on the precious metal in order to curb its smuggling, according to people familiar with the matter.

The government is planning to reduce the duty to 6 percent from 10 percent now, said the people, who asked not to be named as they are not authorized to speak to the media.

Gold shipments to India, which accounted for a quarter of global demand in 2015, have fallen due to higher prices in the first half of this year, a crackdown on undisclosed income and the government’s decision to withdraw old high-value bank notes. The government had raised the import tax three times in 2013 to curb inbound shipments, narrow a record current-account deficit and stop a slump in the rupee. This has led to wide scale smuggling with official prices at four to five percent discount to compete with “duty free” imports of gold in the unofficial channels.

Smuggled gold imports were estimated to be in the range of 140 tons to 160 tons in 2016, higher than the 120 tons in the previous year, according to the World Gold Council. It estimated in November that consumption would be 650 tons to 750 tons this year, the lowest in seven years.