The government on Wednesday increased the import duty on gold and silver from 6 per cent to 15 per cent. This decision came a few days after Prime Minister Narendra Modi appealed to people to avoid buying gold for one year because of economic pressure caused by the Iran war and concerns over foreign exchange reserves.
Import duty is a tax charged on goods that are brought into India from other countries. This means that companies importing gold and silver will now have to pay more tax to the government. The government imposes this duty mainly to reduce imports, control the trade deficit, save foreign exchange, and support the Indian rupee.
The Government of India has imposed a 10 per cent basic customs duty and a 5 per cent Agriculture Infrastructure and Development Cess (AIDC). The government aims to reduce imports of gold and silver, control the trade deficit, and support the Indian rupee.
India is the world’s second-largest consumer of gold and the largest consumer of silver. The country depends heavily on imports to meet domestic demand. Experts believe the higher duty may reduce demand, especially when prices of gold and silver are already high.
Demand for gold in India has increased sharply over the past year because of rising prices and weak returns from the stock market. According to the World Gold Council, investments in India’s gold exchange-traded funds (ETFs) rose 186 per cent year-on-year in the March quarter and reached a record 20 metric tonnes.
India had already started tightening gold imports in recent weeks by imposing a 3 per cent Integrated GST (IGST) on gold and silver imports. Because of this, banks temporarily stopped imports for more than a month. As a result, gold imports in April fell to their lowest level in nearly 30 years.
India imports a large amount of gold every year, and higher imports increase the outflow of US dollars from the country. Higher duty can also increase government revenue through taxes. However, higher prices may reduce jewellery demand and can sometimes increase gold smuggling.
Will Gold Rate increase in India?
Yes, the increase in import duty can increase gold prices in India. Since India imports most of its gold from other countries, importers now have to pay higher tax on imported gold. This increases the overall cost of gold for jewellers and traders.
They usually pass this extra cost to customers, which leads to higher gold prices in the market. However, gold prices also depend on international gold rates, the value of the Indian rupee against the US dollar, and market demand. So, import duty is one of the important factors that can make gold more expensive in India.
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