What happens to the gold that is smuggled into Kerala?

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Dubai: What happens to the gold that is smuggled into Kerala from the UAE? Who is using this much gold? These are some of the questions that plague the mind of a layman as more instances of gold smuggling are reported from Kerala.

Experts point out that the gold that is smuggled into the state is converted into ornaments and reaches the hands of Malayalis via the jewellery shops.

Financial expert and journalist Bhaskar Raj explains the various means and forms through which gold reaches Kerala.

Kerala’s gold consumption

The gold consumption of Kerala was 60 tonnes (approx. 60,000kg) last year, as per the official data. This constitutes 10 per cent of the nationwide consumption. Keralites form just three per cent of India's population.

But the gold that reached Kerala via smuggling is more than this, giving a more startling picture of the gold consumption in the state.

Sales worth around Rs 40,000 crore was reported from all the gold jewellery shops last year. A Goods and Services Tax (GST) of three per cent needs to be given while buying gold in Kerala. Apart from this, 8 per cent of the making charges too have to be paid.

But in the widespread illegal practice, gold is sold to known customers without issuing a bill by the jewellery shops. This is the main ploy used by jewellery shops to attract customers. Thus, 70 per cent of the sale happens without a bill. The state government suffers huge revenue loss due to this.

How much gold can expats bring in?

Women are allowed to bring gold worth Rs 1 lakh (3.5 sovereigns) and men can bring gold worth Rs 50,000 (1.5 sovereigns), as per the baggage rule for expats.

As gold coins or bars, the expats can bring 1kg gold. But if the expat is returning within six months, then 36 per cent tax has to be given.

Merchants will have to pay 12.5 per cent import duty while bringing in gold through the official channel.

Many-fold jump in profit

Dubai is the biggest centre of gold trade in the world. There is a huge difference in price while legally transporting gold from Dubai to Kerala.

The profit made by jewellery shops jumps by many-fold when they make ornaments out of gold procured through smuggling.

The smuggled gold is converted into ornaments at small-scale manufacturing units. There are several such units functioning in various parts of Kerala that provide the ornaments to the jeweller that are in turn sold without a bill.

Why only carriers get caught

Most often, small-time carriers are caught for smuggling, who do not have any major links to the mafia. Ever wondered why only carriers get caught for the illegal activity?

If a carrier successfully transports 1kg of gold to the state, that person is paid around Rs 4 to 5 lakh. Even if they are caught, they are only slapped with minor economic offences. They will be sentenced to imprisonment and slapped with a fine based on the extent of the illegal activity. Several gangs even try to ‘help’ out these carriers.

Sometimes, even the seized gold can be retrieved by paying the fine. Only the government stands to lose because of gold smuggling.

Those of you buying gold without the bills need to remember that by helping the jewellery shops in evading tax, you are indirectly encouraging gold smuggling.

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