The central government on Friday hiked the import duty on gold to 15 per cent from 10.75 per cent to control the current account deficit (CAD) and shield the rupee, which is trading at record lows against the US dollar. India is the second-largest consumer of gold in the world but imports most of its requirements.
According to data from the World Gold Council (WGC), the country imported 98 tonnes of the yellow metal in May, much higher than 27.1 tonnes in the preceding month. Consumption of the precious metal took a hit during the pandemic, but has been reviving since last year.
The latest changes announced by the Centre will come into effect on June 30. Earlier, the basic customs duty on gold was 7.5 per cent, which has been raised to 12.5 per cent. Along with the agriculture infrastructure development cess (AIDC) of 2.5 per cent, the effective gold customs duty will be 15 per cent. Finance minister Nirmala Sitharaman said India does not produce much gold. So, theimport of the yellow metal hasput stress on forex reserves.
“Gold is inelastic in its demand. So, you would want tosee whether you can at leasttry to discourage to that extent people importing. Or ifyou are importing and you stillwant to import, please pay upthat much more so that country can have some revenue,”she said. Gold also attracts 3 percent GST in the country.
The government’s decisionled to prices firming up onFriday. At the MCX, the precious metal (August delivery)was trading at Rs 51,735 per 10gram, up 2.41 per cent over theprevious close.
