Commerce ministry urges the finance ministry to reduce import duty on gold to 2%
The Dollar Business Bureau
The Commerce and Industry ministry has urged the Finance ministry to reduce the import duty on gold to 2% from 10%, to encourage the growth of Indian jewellery in the international market. This was revealed to the media by Manoj Dwivedi, Joint Secretary, Commerce ministry.
India’s reducing trade deficit will also make it easy for the government to lower its import duty on bullion Dwivedi added.
And with the reduction in import duty, gold’s rates would become cheaper, boosting demand thereby supporting global prices. It would also help keep a check on gold smuggling which many predict could increase after a hike in sales tax of gold jewellery beginning July 1.
Dwivedi justified that since the current account deficit (CAD) is improving, the government should include the reduction of import duty on gold in the budget.
India raised the import duty on gold to 10% in August 2013 in order to narrow the gaping CAD. But with gold imports halving since May, India’s trade deficit too narrowed to $12.96 bn in June. Keeping these developments in mind, the CIM has impressed upon the Finance ministry to reduce the import duty to 2% in a phased manner, Dwivedi stressed.
Smuggling of gold had increased after the government had raised the import duty. Estimates by the World Gold Council said that around 120 tonnes of gold was smuggled into India in 2016.
Annually India imports around 800 tonnes of gold as Indians rely on it as a substitute for cash and hoard, donate or gift gold on a large scale.