Black market sales of gold bullion and jewelry in India are anticipated to rise after the nation’s Goods and Services Tax replaced a few other taxes, and the end consumer’s tax rate for gold increased effective July 1.

The World Gold Council estimates that in 2016, nearly 120 tons of gold entered the country illegally through smuggling. Legal imports account for nearly 800 tons of the metal.

India is the world’s second largest buyer of gold, with the bulk of consumer purchases being from imported gold.

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The flat GST placed on gold bullion and jewelry sold through retail channels is set at 3 percent.

According to BankBazaar.com, the GST that was announced on June 3 replaces the former Value-Added Tax, or VAT, the Central Excise Duty and the Customs Duty among other taxes, with a flat 3 percent across-the-board tax. All gold and gold-related jewelry would be taxed at a flat rate of 3 percent, which would be borne by the end consumer.

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“In addition to this, the government has also levied a 5% tax on making charges. At present, there is no tax on making charges, which account for close to 12% of the actual cost of the gold,” according to the BankBazaar.com website.

Reuters reports that gold smuggling has been on the rise since import taxes reached 10 percent in 2013. Market players suggest that lowering the import duty would likely increase legal importation of gold and reduce illegal gold trafficking.