India Trade Ministry Sees Scope for Lowering Gold Import TaxBy
Customs duty on gold shipments currently stands at 10 percent
The tax was raised three times in 2013 to curb imports
India’s trade ministry sees scope for lowering the import tax on gold as the current account deficit improves in the world’s second-biggest consumer of the metal.
“There is a case for lowering import duty,” as it is directly linked to the current-account deficit, which has been improving, Manoj Dwivedi, joint secretary at the trade ministry, told reporters in Mumbai. “It will be one of the strong recommendations on the budgetary side from the ministry.”
The government had raised the import tax three times in 2013 to 10 percent to curb inbound shipments, narrow a record current account deficit and stop a slump in the rupee. The deficit has since shrunk and remains at a comfortable level for the finance ministry to lower the tax and help the gold industry, Dwivedi said. The nation imports almost all the gold it uses.
“We have been saying that an ideal rate for the industry is 2 percent,” he said, referring to the import tax on gold. “It can be brought down in a phased manner or in one go.”
The country’s current account deficit, a broad measure of trade, narrowed to 0.7 percent of gross domestic product in 2016-17 from 1.1 percent in 2015-16, according to the Reserve Bank of India.
A cut in import tax would reduce the cost of jewelry for Indians, who buy gold during festivals and marriages as part of the bridal trousseau or as gifts. It’ll also curb smuggling of the precious metal. Local consumption is forecast to rise to 850 metric tons to 950 tons by 2020 from about 650 tons to 750 tons in 2017, according to an estimate from the World Gold Council.