Gold and silver are set to cost more, with the government on Tuesday increasing the import and excise duties on these two precious metals. The new duty structure would be based on value, not a fixed rate.
The new rates (on ad valorem basis) — two per cent on 10 gm gold and six per cent on one kg silver — mean that importers will have to pay double the duty. Similarly, excise duty has been hiked to 1.5 per cent per 10 gm for gold and four per cent per kg for silver. Diamonds, too, will now attract an import duty of two per cent.
Earlier, the import and excise duty for gold were Rs 300/10 gm and Rs 200/10 gm, respectively. Silver attracted Rs 1,500 per kg as import duty and Rs 1,000 per kg as excise.
The move is expected to garner Rs 500-600 crore as additional revenue to the exchequer till the end of the financial year.
However, market players are not too perturbed. “Domestic consumers would have to pay one per cent more due to an increase in the overall duty structure. Consumers, therefore, will refrain from buying for a while but will come back once prices stabilise,” said Rajiv Jain, chairman of the Gems & Jewellery Export Promotion Council.
Analysts say the move is targeted at reducing dollar outflows due to gold imports, which are hurting the current account. The current account deficit in the first half of the current financial year was $32.8 billion whereas gold imports doubled on a year-on-year basis to $28.6 billion, according to Edelweiss Research.
Gold imports have already started falling in the second half. In the September quarter, imports fell to 200 tonnes from 553 tonnes in the first six months. The industry expects gold imports to fall further to 125 tonnes in the December quarter.
With this change, gold import duty will go up by Rs 246 at Tuesday’s price of Rs 27,291 per 10 gm (-999 purity) gold. In silver, the cost of imports will rise from Rs 1,500 to Rs 2,979 per kg, an increase of Rs 1,479 per kg at the current price of Rs 49,628 a kg.
The government had recorded revenues of Rs 1,568 crore during the financial year 2009-10, with overall gold imports of 739 tonnes. The government’s income shot up to Rs 2,553 crore during the financial year 2010-11, with overall gold imports of 905.18 tonnes.
