The gems and jewellery industry anticipates challenging times following the government's decision to increase gold import duty to 15 per cent, a move that exporters warn could fuel the grey market and heighten smuggling risks.
Monthly gold imports have declined to 25-30 tonnes from 70-80 tonnes while recycling of old jewellery has increased following the recent hike in import duties.
The Indian government has increased import duties on gold and silver from 6 per cent to 15 per cent to curb inbound shipments of precious metals amid a rising import bill due to the West Asia crisis.
India has capped gold imports under the Advance Authorisation scheme at 100 kg, a day after significantly increasing import duties on precious metals. This move aims to tighten conditions for duty-free gold imports by jewellery exporters and curb non-essential imports amidst a ballooning import bill.
Any revision in gold import duty is unlikely to take place before the Budget, says finance ministry official.
The government and the Reserve Bank had also imposed certain other restrictions on its shipments, including linking of imports to exports to prevent outgo of the foreign exchange.
The Reserve Bank too imposed a series of curbs to restrict gold imports.
Gems and Jewellery Export Promotion Council (GJEPC) has urged the government to reduce import duty on gold to 4 per cent from 7.5 per cent and a special package for the sector in the forthcoming Budget to boost shipments. As part of its pre-Budget recommendations, the council has also suggested a reduction in the import duty on cut and polished diamonds; cut and polished precious and semi-precious gemstones from 7.5 per cent to 2.5 per cent. "If (gold) imported at 4 per cent duty rate....working capital amounting to Rs 225 crore would be blocked instead of Rs 500 crore," the council said in a statement.
India will also launch a sovereign gold bond to lower physical demand.
Despite a sharp increase in import duties on gold and silver to 15 per cent, the precious metals are trading at significant discounts in the domestic market, with gold seeing discounts of up to $200 an ounce and silver up to $6 an ounce.
Revenue intelligence and customs officers are set to intensify surveillance and increase vigilance on international borders to combat potential gold smuggling following a significant increase in customs duty on gold.
The government has hiked gold import duty to 15 per cent from 10.75 per cent to check the current account deficit (CAD) and rising import of the yellow metal. The duty changes came into effect on June 30. Earlier, the basic customs duty on gold was 7.5 per cent, now it will be 12.5 per cent.
India's organised gold jewellery retail sector is projected to experience a 13-15 per cent year-on-year decline in sales volumes this fiscal, following an 8 per cent drop last year, due to elevated gold prices and a recent import duty hike, according to a Crisil report.
In August 2013, import duties on gold, silver and platinum were hiked to 10 per cent in order to curb the surging imports and also to check CAD.
Congress party chief Sonia Gandhi has written to the government, to ask for a cut in the record import duty on gold and for other restrictions to be eased.
The union government is expected to cut two per cent import duty in gold in the forthcoming budget, as local jewellers run out of inventory, a leading US brokerage said.
Levy in India one of the highest in the world; finance minister urges banks to tell customers not to invest in the metal.
The gold prices surged by Rs 100 to close at Rs 14,750 per ten gram in the bullion market on Monday influenced by budgetory proposals to hike import duty on gold bars even as the metal in overseas market quoted lower.
A govt report on Wednesday recommended reining in gold imports to curb deficit.
The government pushed import duty on gold jewellery up by half to 15 per cent, the finance ministry said on Tuesday, setting it higher than raw gold duty in a move aimed more at protecting the domestic jewellery industry than stemming bullion imports.
Titan will continue investments, even as it notes it is too early to assess how customer sentiment and store footfalls will be impacted by the Prime Minister's appeal to reduce gold consumption and the recent hike in import duty.
With duties at 15%, GST at 3%, and making charges running as high as 20% -- the gap between a smart purchase and a careless one can easily be Rs 30,000 to Rs 50,000 on every Rs 1 lakh invested. And most of that gap is entirely avoidable. Ramalingam Kalirajan explains the math.
In an interview to Business Standard, Rangarajan says CAD will be brought under control at around two per cent of the gross domestic product.
'Even last year, when India bought gold, the physical quantity was much less than the previous years.'
The Indian government has imposed import restrictions on all forms of gold, silver, and platinum articles to prevent misuse of free trade agreements (FTAs). The restrictions apply immediately, regardless of prior contracts or commitments.
'Customers do not recover the original making charges paid on old jewellery. Sentimental value is lost when heirlooms are exchanged.'
Huge gold imports have put pressure on the country's Current Account Deficit, which in turn is affecting the value of rupee.
Gold imports more than doubled in August to a record high of $10.06 billion, mainly on account of a drastic cut in customs duty and ongoing festive demand, according to the Commerce Ministry data. Gold imports stood at $4.93 billion in August 2023. On record high imports, Commerce Secretary Sunil Barthwal said that the tariff rates on gold have been reduced drastically so that smuggling and other activities can come down.
Seeking to restrict gold imports, the Reserve Bank on Friday said nominated banks and agencies will not be allowed to import the precious metal in excess of their entitlements in first or second lot under the 80:20 scheme.
Gold imports in 2011-12 amounted to $56.5 billion and in the current financial year, till December, they are estimated at $38 billion.
India sharpened measures to curb imports of the yellow metal by hiking the import duty and restricting consignment imports, after shipments jumped to more than 300 tonnes in April and May.
The Rs 250,000-crore (Rs 2.5 trillion) domestic jewellery sector is likely to be hit hard by frequent rises in gold import duty and the sustained depreciation of the rupee against the dollar.
Providing relief to the economy from widening trade deficit on account of gold imports, the inward shipments of the metal slumped in December to 39 tonnes, Commerce Secretary Rajeev Kher said on Wednesday.
Industry representatives say the government may be tempted to raise the duty on gold and silver by Rs 100 per 10 gram and Rs 500 per kg, respectively, to earn extra revenue at a time the economy is facing several challenges.
The government should also introduce zero duty for gold imports so as the world trade shifts to India.
The Indian rupee plummeted to an all-time low of 95.80 against the US dollar, settling at 95.66, driven by elevated crude oil prices and escalating geopolitical tensions in West Asia, despite potential RBI intervention and import curbs on gold.
Central bank says it may bring more curbs.
Aimed at curbing gold imports and relying more on domestic supply, the government on Monday linked Gold ETF with gold deposit scheme.
India's gold imports, which have a bearing on the country's current account deficit (CAD), increased 26.7 per cent to $35.95 billion during the April-December of this fiscal due to healthy demand, according to government data. The imports stood at $28.4 billion during the same period a year ago. In December 2023, imports of the precious metal jumped by 156.5 per cent to $3 billion, as per the data released by the commerce ministry.
The customs duty from gold imports could be approximately Rs 8,000 crore, about less than half of what was collected a year ago.
