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Cut in gold import duty unlikely before Budget

Source: PTI
December 04, 2014 14:53 IST
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Any revision in gold import duty is unlikely to take place before the Budget and there is no proposal as of now to reduce the 10 per duty, a finance ministry official said. "On import duty (on gold) there is no decision at the moment.

Import duty whatever has to be done will form part of the Budget.

At the moment there is no proposal to reduce import duty on gold," the official said.

There has been widespread expectations of reduction in customs duty on gold due to the improved current account deficit situation.

The Commerce Ministry has also been pitching for a cut in import duty on the precious metal.

General Budget for the coming fiscal is generally announced on the last working day of February.

Earlier this week, RBI Governor Raghuram Rajan had also said that there were some requests to change the duty structure (on gold) and that government will view and take a decision on it.

The then government in 2013 had increased import duty on gold to 10 per cent following rising current account deficit (CAD) mainly due to import of gold.

Speaking about the removal of 80:20 restriction, the official said it is enough to ease the problem of gold availability and this will curb the problem of smuggling that was taking place. Besides, the CAD situation is fairly comfortable and therefore there was no need to continue with it, the official added.

The 80:20 gold import curbs were put in place in August 2013 to curb high gold inflows that was leading to widening CAD.

Last month, the government decided to scrap this scheme as it was creating distortions.

Under this scheme, at least 20 per cent of the imported gold had to be mandatorily exported before bringing in new lots.

The surprise move came at a time when the industry was actually expecting more curbs on imports of gold, which is seen as an unproductive asset-attracting household savings away from the financial markets.

"The decision to scrap the 80:20 scheme is a reasonable one and let us see how it plays out.

I think the fact that we have a substantial fall in crude imports means that we have some room to sustain an expansion in another import," the RBI Governor had said.

The governor had said the decision to withdraw the scheme was taken by the government and RBI involvement was just to advise it on the same as there were some debates about the 80:20 scheme and the distortion it was creating.

It can be noted that gold imports jumped 280 per cent to $4.17 billion in October.

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