The Union Budget has doubled customs duty on gold bars of not less than 995 fineness, from 2 per cent to 4 per cent on the value of import. Apart from the increase in duty, unbranded gold jewellery has also been covered under central excise of 1 per cent. In addition, there has been a tax deduction at source proposed for cash purchase of jewellery above Rs.2 lakh. Industry feels doubling of customs duty is unlikely to curb demand and consequently imports, which are thought to have aggravated the current account deficit.
Rajesh Mehta, Chairman, Rajesh Exports, said, “The increase in customs duty and excise would mean an increase of about Rs.825 per 10 gram on the current prices of gold.”
He felt that the steps were taken primarily to dissuade the Indian customer from buying gold to reduce the gold import bill. “The measures would not help in dissuading the Indian consumer from buying gold jewellery, but would only end up increasing the price of gold and gold jewellery in India, which would further encourage people to buy more gold for investment. Due to which the intention of the government to reduce gold consumption in the country would be defeated.”
“With great difficulty during the last few years, a major part of gold and jewellery industry had returned to organised business. Smuggling, parallel and black market economy was on a back foot due to the reduced import duty structure on gold imports.
With these steps, we are retuning to the earlier days of high duty on gold which would not be a welcome move for the industry and the economy of the country.”
Ajay Mitra, Managing Director, India and the Middle East, World Gold Council, said, “The World Gold Council acknowledges the announcement made in the Union Budget to further increase customs duty on imports of gold to 4 per cent from 2 per cent. We believe that in the longer term, this increase will not substantially affect demand.”
