Custom duty on gold, other precious metals increased from 10% to 12.5%

Gold prices till June 2019 end have risen by around 9% from May 2019 in international markets in the backdrop of weak global forecast and increasing geopolitical tension between US and Iran among others reasons.

The government in its budget 2019-20 has proposed increase in custom duty on gold and other precious metals from 10% to 12.5% making the import of yellow metal costlier.

City residents purchasing gold jewelery on the occasion of Dhan Teras at a shop in Ludhiana on Monday, November 5, 2018. ((File photo by Gurminder Singh/Hindustan Times))

Gold imports mainly help in meeting the demand from the jewellery sector.

India imported gold worth $32.8 billion during 2018-19 which accounted for 6.5% of total imports as per CMIE data. This was lower than $33.6 billion spent in 2017-18. India’s yearly import of gold has increased in the last two years after a fall in 2016-17.

The move could be in the backdrop of rising gold prices in the international markets. Month end gold prices were at 6 year high in June 2019 as per world gold council data. Gold prices till June 2019 end have risen by around 9% from May 2019 in international markets in the backdrop of weak global forecast and increasing geopolitical tension between US and Iran among others reasons.

The increase in duty has come even as government had earlier received representation from traders for reduction in basic custom duty, as acknowledged by the finance minister in a written reply in Parliament earlier this week.

A similar hike was proposed for silver (including silver plated with gold and platinum); base metal clad with silver; platinum; and waste and scrap or precious metals. Currently, these metals also attract 10% import duty.

Now, with hike in the duty, jewellery made of these precious metals will become expensive.

The decision to raise import duty on gold came at a time when the domestic jewellery industry was demanding a cut in the same. The commerce ministry, too, had in past recommended for reduction in the duty.

The country’s gold imports dipped about 3 per cent in value terms to $32.8 billion during 2018-19. Dip in the imports expected to keep a lid on the current account deficit.

Total imports of the precious metal in 2017-18 stood at $33.7 billion as against $27.5 billion in 2016-17 and $31.8 billion in 2015-16.

In volume terms, India imported 982 tonnes of the yellow metal in the previous financial year. The imports in 2017-18, 2016-17 and 2015-16 were 955 tonnes, 778 tonnes and 968 tonnes, respectively.

(With agency inputs)