Indian govt to lose $3 bn in duty on doré gold imports in 5 years: PwC

The Indian government stands to lose approximately $3 billion in revenues over a five-year period on account of differential rates of import duties levied on refined and unrefined gold, says a report.

Currently, the import duty on refined gold is 10.30 per cent while that on unrefined or dore gold is 8.24 per cent.

The existing duty differential of 2.06 per cent between the customs duty paid on import of refined gold and the level paid on unrefined gold has the potential to cost the treasury $3 billion (Rs18,000 crore) in duty foregone over a five-year period, PricewaterhouseCoopers says in a report.

Also, since India's only refinery which is accredited by the London Bullion Market Association (LBMA) is majority foreign owned, a significant portion of the additional profit derived as a result of the duty differential may not be injected back into the Indian economy, according to PwC.

Going by the report prepared by the global consultancy, the current 2.06 per cent duty differential - representing $25.75 an ounce - is significantly higher than the refining cost.

"The five-year average potential impact of the current policy could result in up to $3 billion in tax revenues being lost to the Government of India," the report said.

This long-term modelling is based on assumption that average gold spot price is $1,400 per ounce.

Under the current tax regime, the Indian Government is losing approximately Rs560 crore in duty revenue for every 100 tonnes of dore gold refined in the country.

PwC was engaged by Australian investor relations firm Cannings Purple to analyse whether there is any evidence, based on publicly available information, to support the economic effectiveness of the import duty differential between refined and unrefined gold dore.

Last fiscal, India imported about 825 tonnes of gold.

"If all of this had been imported in the form of unrefined gold dore it would represent foregone duty revenue of approximately $770.4 million (Rs4630 crore)," the report said.