India has increased duty on gold imports. Chairman All India Gems and Jewellery Domestic Council, Anantha Padmanaban said the tax increase may discourage buyers and trim demand in the physical market by ten percent this year, from 760 tons in 2018.
The import duty increased for the first time since 2013 to 12.5 percent from 10 percent. Padmanaban said, “This is going to encourage a lot of smuggling.”
Padmanaban said, “This is very unfortunate and disappointing, we were expecting a cut in customs duty and this came as a surprise and a shock.”
The current differential between Indian and international gold prices will widen by 2.5 percent to 15.5 percent. The high duties have spurred a spate of smuggling, including attempts to bring in bullion via planes and trains. Domestic prices have tracked a surge in overseas spot gold and further increases would imperil demand during the festival and peak wedding season running from August to December.
The decision is part of the federal budget for the year through March 31, 2020. Gold prices in India hit an all-time high after the announcement. Shares of gems and jewelry companies fell sharply into negative territory on the Bombay Stock Exchange.
India is the second-largest bullion consumer after China. The country imports almost all of its gold. It raised taxes on gold three times in 2013 to control a record current account deficit and stop a decline in the rupee. (DP)
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