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India Raises Gold Import Duty to 6%
Jan 21, 2013 8:02 AM
By Dilipp S Nag
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RAPAPORT... India increased the import duty on gold to 6 percent from 4 percent effective immediately to discourage the demand for gold, which is one of the key contributors to the country's large current account deficit. The government also increased the import duty on platinum to 6 percent from 4 percent.
India’s current account deficit for the first fiscal half, which ended on September 30, 2012, stood at $38.7 billion, or 4.6 percent of its gross domestic product (GDP).
The government has proposed to provide a link between gold exchange-traded-funds (ETFs) and the gold deposit scheme. The objective is to unfreeze or release a part of the physical holdings of gold by mutual funds under gold ETFs and enable them to deposit the gold with banks under the gold deposit scheme, it said.
“The advantage will be that a part of the gold lying in stock will be brought into circulation and will partially meet the requirements of the gems and jewelry trade," said Arvind Mayaram, India's secretary of the Ministry of Finance. "It is hoped that, consequently, there will be a moderation in the quantity of gold that is imported into the country."
This past year, the government doubled the import duty on gold to 4 percent to tame demand and it achieved some success in curtailing imports as the country’s gold and silver imports declined about 33 percent year on year to $21.3 billion during the April to September period.
There was concern among industry players that the government might further hike the gold import duty by 2 percent in its federal budget announcement for fiscal year 2013-14 due on February 28. But the announcement so far in advance of the budget came as a surprise. The increased duty is expected to push gold prices higher in the domestic market but help reduce imports, which are affecting the country’s deficit.
Gold prices rose to an all-time high in local currency to over INR 32,500 per 10 grams in 2012, driven by a pick up in consumer demand, a weak rupee against the U.S. dollar and the uncertain global economic environment. The precious metal is currently hovering around INR 30,500 in the local market.
The government has also appealed to the people to moderate their demand for gold. Gold imports in fiscal 2011-12 amounted to $56.5 billion and in the current fiscal year up to December 2012, gold imports were estimated at $38 billion.
The government stated that consequential changes in additional customs duty and excise duty would be carried out in notifications dealing with the import duty or excise duty on gold bars, gold ore and refined gold.
"The duties will be reviewed after some time if there is a moderation in the quantity of gold that is imported into the country," it noted.
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Tags:
Dilipp S Nag, Duty, gold, Import, Import Duty, India, tax
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