The Government has scuffed the shine from gold and platinum, with the proposed doubling the import duty on these precious metals.
"I propose to increase basic customs duty on standard gold bars; gold coins of purity exceeding 99.5 per cent and platinum from 2 per cent to 4 per cent and on non-standard gold from 5 per cent to 10 per cent," Finance Minister Pranab Mukherjee said in his Budget speech in Parliament. The basic duty on gold ore, concentrate and dore bars for refining has also been doubled to 2 per cent. The excise duty on refined gold has been increased from 1.5 per cent to 3 per cent.
"Gold will certainly get costlier by 3-4 per cent as jewellers will pass on customs duty and excise duty on to the consumers,’’ Gems and Jewellery Export Promotion Council chairman Sanjay Kothari said.
The government also proposed bringing unbranded precious metal jewellery under the ambit of excise duty of one per cent but excluded branded silver jewellery from excise duty.
To prevent round-tripping, the government has proposed imposing basic customs duty of two per cent on cut and polished, coloured gem stones at par with diamonds. "One of the primary drivers of the current account deficit has been the growth of almost 50 per cent in imports of gold and other precious metals in the first three quarters of this year. I have been advised to strengthen the steps already taken to check this trend for better results," Mr. Mukherjee remarked. In 2011, 1,037 tonne of gold was available in the domestic market, of which 967 tonne was imported and the rest was from other sources like recycled, according to the World Gold Council data.
To minimise the impact on small artisans and goldsmiths, the Finance Minister has taken various steps, such as charging excise duty on tariff value equal to 30 per cent of the transaction value.
Gems and Jewellery Promotion Council chairman Rajiv Jain says the demand for turnover tax has not been considered and that the existing uncompetitive tax environment is driving investments away from India. "The measure of increase from 2-4 per cent duty announced will lead to a corrupt state of affairs due to greater probabilities of trafficking of gold into the country through illegal channels. The interest in buying gold jewellery and gold bars will also go down with the consumers having to pay more duties," he remarked.
