The Centre on Tuesday hiked the customs duty on gold, platinum and silver to 10 per cent, a step that will bring in an additional revenue of Rs. 4,830 crore.
In a statement here, the Finance Ministry said that following the duty revision, consequential adjustments in customs duties are also being made on gold ore/concentrate, gold dore bar and silver dore bar. “Thus, additional duty of customs (CVD) on gold dore bars and on gold ore/concentrate is being increased from 6% to 8% and on silver dore bar from 3% to 7%,” it said.
Alongside, to bring about parity, the excise duty on refined gold bar produced from gold ores/concentrate, gold/silver dore bar or from copper smelting is being increased from seven per cent to nine per cent. Likewise, the excise duty on silver manufactured from silver ore or concentrate, silver/gold dore bar or from copper, zinc or lead smelting is being increased from four per cent to eight.
At a press briefing later in the day, Revenue Secretary Sumit Bose said the revenue implications of these duty changes were estimated at Rs. 4,830 crore for the remaining part of the financial year at current levels of import. However, he was quick to point out that the basic purpose of the hike in levies was to curb the import of precious metals to check the CAD and not for raising revenue.
As for the increase in duties on non-essential and luxury goods, as was indicated by the Finance Minister on Monday, Mr. Bose said the government was still working on the proposed hike in import duties on such items.
Gold prices jump
Even as the efficacy of the duty hike is expected to be witnessed during the remaining months of the fiscal year, the immediate effect — as far as the genuine consumer in the festive and marriage season is concerned — is that gold prices zoomed by Rs. 565 to Rs 29,825 per 10 grams in Delhi soon after the notification. What is more, bullion traders are anticipating gold prices to appreciate by as much as Rs. 600 per 10 gms.
In 2012-13, India imported 845 tonnes of gold valued at more than Rs. 2.45 lakh crore, while silver imports at 1,963 tonnes was valued at Rs 10,691 crore. As for the current fiscal year, the Ministry statement noted that gold imports went up by 87 per cent to 383 tonnes in April-July 2013 from 205 tonnes in the same period a year ago. In value terms, the increase was 68 per cent from Rs. 56,488 crore to Rs. 95,092 crore. Silver imports during April-July 2013 this year was valued at Rs. 12,789 crore as compared to Rs. 4,281 crore during the like period of 2012, marking an increase of 200 per cent increase.
To combat the situation, the government, which hiked the duty on gold from Rs. 300 per 10 grams to two per cent with effect from January 2012, increased the levy to four per cent in the budget for 2012-13 and further to six per cent in January this year and yet again to eight per cent on June 5, 2013.
Even as Ministry officials appear sanguine that the frequent increases in duty on gold would not lead to a spurt in smuggling, India Inc. is of the view that hiking duty on gold would curb demand in the short run but it would encourage smuggling in the long term.
In a statement, CII Director-General Chandrajit Banerjee said: “No doubt, a hike in duty in gold imports would curb demand for gold in the short run. But from a long-term perspective it is counterproductive as it would encourage smuggling of the precious metal.”
