Amid claims of a rapid surge in gold smuggling into Nepal from India following differences in prices due to higher import duty for gold in Nepal, the Government of Nepal has reduced the tariff.
Following approval from a recent Cabinet meeting, the Ministry of Finance decided to slash the customs duty on gold imports by half to 10 percent, and reduced that on silver from 15 to 10 percent.
While announcing the budget for the current fiscal year, 2024/25, earlier this year in May, the then Finance Minister Barshaman Pun had raised the customs duty on the import of gold from 15 to 20 percent.
Later in July, India’s Finance Minister Nirmala Sitaraman, while announcing the union budget, slashed the import duties on gold and silver from 15 to 6 percent.
The Indian government said it would charge 5 percent basic customs duty and 1 percent in Agriculture Infrastructure & Development Cess (AIDC) on gold and silver imports, lowering import duties to 6 percent from 15 percent, according to Reuters. “To enhance domestic value addition in gold and precious metal jewellery, I propose to reduce customs duties of gold and silver to 6%,” reported Reuters citing Sitharaman as saying.
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The disparity, which made the precious yellow metal more expensive in Nepal, motivated many Nepalis, especially the ones living near the India-Nepal border to opt for markets on the Indian side for gold. Nepalis have also started importing gold jewellery, required for weddings and other purposes, from India, which has negatively affected the domestic market.
Bullion traders have argued that people living near the Nepal-India border preferred getting gold from the Indian markets, claiming that there is around Rs 20,000 price difference in a tola on both sides of the border.
The new customs rates have already been implemented, Harisharan Pudasaini, Director General of the Customs Department, told NBA. “The new customs rates are in effect,” he told NBA on Sunday evening, adding that the department has written to its subordinate offices about the latest development.
The government expects the adjustment to discourage smuggling and illegal trade, Pudasain added.
It has resulted in a significant decline in the amount of gold coming into the country through official channels.
During the first four months of the current fiscal year, 132.564 kg of gold were imported in Nepal, according to the Customs Department. In the same period last fiscal year, the country had imported 1,050 kg of gold.
However, the import of gold jewellery has increased slightly in the first quarter. Such jewelleries worth Rs 19.08 million were imported in the first quarter this year, compared to 11.32 million in the same period last year.
The government was also under pressure to adjust the tariff following a significant reduction in its revenue from gold imports between mid-July and mid-November this year.
Additionally, bullion traders had been putting pressure on the government to lower the duties.
Traders have stated that the sharp decline in gold imports was primarily due to the continuous rise in international gold prices, resulting in lower domestic consumption, and the increase in domestic taxes.
Manik Ratna Shakya, the Founding President of the Federation of Nepal Gold and Silver Dealers’ Association (Fenegosida), welcomed the government decision, noting that it would help curb the illegal smuggling from India.
Senior Vice President of Fenegosida, Diyas Ratan Shakya, too, praised the government’s latest step, mentioning that currently there is a price difference of up to 20,000 rupees per tola (a unit of weight used for gold) between the border markets in India and the Nepali market, with gold being cheaper in India.
