In yet another bid to curb surging gold imports and the burgeoning current account deficit, the Government today raised import duty on precious metals to 10 per cent.
The hike — from 8 per cent for gold and 6 per cent for silver — is also expected to rake in an additional Rs 4,830 crore for the exchequer.
So, this festival season, buying gold, silver or platinum will turn a little more expensive .
The third time
This is the third time since January that import duty on gold has been hiked. Going by the tariff value of gold, a 2-percentage point hike translates to nearly Rs 500 for 10 gm, while in the case of silver, it is over Rs 1,500 a kg. Raising import duty is a part of the measures to contain the CAD (the difference between payments to be made and received in dollars) to 3.7 per cent of gross domestic product. On Monday, the Finance Minister had outlined measures to compress imports.
The Ministry is yet to give details about the timing and quantum of duty to be raised on non-essential items.
Commenting on the moves, Bhupali Gursale, economist with Angel Broking, said some measures aimed at narrowing the CAD were needed as a follow-up to the Reserve Bank’s liquidity tightening steps since the latter were largely aimed at managing speculation on the currency and attracting capital inflows into the debt market. “In that context, the import duty hike on gold and the anticipated duty hikes on import of non-essential consumption items are justifiable,” she said.
However, the bullion industry feared the duty hike would add to the troubles of the organised sector and the unorganised sector would take over. “The industry is in the worst shape ever. The duty hike will make it difficult to get raw materials for manufacturing jewellery,” Haresh Soni, Chairman of All-India Gems and Jewellery Federation, said.
Following the latest hike, the duty differential between gold raw and gold jewellery will narrow, he said. At present, import duty on gold jewellery stands at 12 per cent. Soni feared that import of jewellery will increase, adversely impacting the manufacturing facilities. “There is a serious threat to 10 million artisans engaged in jewellery making,” he added.
Smuggling may rise
The industry also fears that the duty hike will encourage smuggling. Finance Ministry figures support this view. Though Ministry officials said the number of seizures had gone up, they pointed out that the increase in value could be the result of the hike in prices.
The revenue authorities said that field officers were being sensitised on the issue. The Ministry has already lowered conditional duty-free import of gold to one kg from 10 kg.
The condition put forth is that this much gold can be imported as part of the baggage of an individual coming to India after spending at least six months abroad and has paid in foreign currency for the purchase.