With gold prices on the rise, the government on Thursday proposed to raise the limit on duty-free import of jewellery via passenger baggage to Rs 50,000 for men and Rs 1 lakh for women.
“Gold prices have risen since (1991), and passengers have complained of harassment. Hence, I propose to raise the duty-free limit to Rs 50,000 in the case of a male passenger and Rs 100,000 in the case of a female passenger, subject to the usual conditions,” said finance minister P Chidambaram in his budget speech for 2013-14.
The rule has been amended for Indian passengers, who have been residing abroad for over an year, or a person who is transferring his residence to India.
Since 1991, the passenger limit for bringing jewellery has been Rs 10,000 for males and Rs 20,000 for females.
The limit of duty-free allowance for bringing jewellery for crew members of vessels and aircraft has also been enhanced from R600 to R1,500.
India, the world’s largest consumer of gold jewellery, is estimated to have imported 750 tonnes of gold in 2012 and an additional 200 tonnes was believed to have been imported through unofficial channels, taking the total almost to the 2011 level of 969 tonnes.
The government also proposed reduction in import duty from 10% to 2% on pre-forms of precious and semi-precious stones.
However, import duty on gold was not enhanced from the current level of 6%, giving some respite to the jewellery industry.
RBI and a wider section within the government have been calling for more measures to discourage people from buying gold as imports of the yellow metal have been a big drain on forex. This in turn has led to a higher current account deficit (CAD), which rose to 5.4% in the September quarter.
“My greater worry is the CAD. The CAD continues to be high mainly because of our excessive dependence on oil imports, the high volume of coal imports, our passion for gold, and the slowdown in exports. This year, and perhaps next year too, we have to find over $75 billion (Rs 4.08 lakh crore) to finance the CAD,” said Chidambaram.
To discourage people from investing in gold and thereby curb the current account deficit, the government also offered incentives for first time home buyers and announced new financial instruments for protecting savings from inflation.