The government hiked import duty on gold for a third time in eight months on Tuesday. The announcement led to a sharp recovery in the Indian rupee, which pulled back below the key 61 mark against the dollar after earlier slipping to near record lows.
Here are the 10 facts about the gold duty hike
The import duty on gold was hiked to 10 per cent from 8 per cent, while duty on silver was hiked from 6 per cent to 10 per cent. The excise duty on gold bars was hiked to 9 per cent from 7 per cent.
Prices of branded jewellery are set to rise after the government raised customs duties on precious metals such as gold and silver. Sanjeev Bhatia, president (finance) at PC Jeweller told NDTV that the company will pass duty burden to customers.
The hike in duty is unlikely to impact jewellery demand in India, but investment demand in gold coins and bars will become unattractive, analysts said.
At the current level of imports, the government expects a revenue of Rs 4,830 crore from the duty hikes for the rest of the financial year ending March 31, 2014.
The government's move is aimed to restrict gold imports in the country. India is the largest importer of gold in the world and the yellow metal is the second largest imported item after crude oil.
Huge imports of gold fuelled a record current account deficit in 2012-13. Rising CAD has weighed on the Indian rupee, which hit a record low of 61.80 last week.
The hike in duties come a day after Finance Minister P. Chidambaram said the government was looking to contain gold imports at 850 tonnes this fiscal year, after imports of 950 tonnes last year. This is likely to lower the import bill by $4 billion, he added.
The latest hike was necessitated after gold and silver imports in July rose to $2.9 billion as compared to $2.45 billion in June. The jump in imports came despite a series of moves by the Reserve Bank to strangle supplies.
Gold import has gone up despite an 8 per cent jump in global gold prices in July. Domestic gold prices rose about 9 per cent during the month.
Rising import duty and restrictions on gold may have forced Indians to bring gold through neighboring countries, according to media reports. Pakistan, Sri Lanka and Nepal have imposed restrictions on gold trade.
