Duty on gold may rise to 6% to curb imports

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SummaryRBI moots gold bank, bonds

The government plans to make gold imports more expensive by increasing import duty. The basic customs duty on gold and platinum could be raised to 6 per cent from 4 per cent, said a government source. The increase will be the second straight one on standard gold and platinum bars in two years. The duty was raised to 4 per cent in the last budget while the rate on gold coins was doubled to 10 per cent.

Unless the pace of gold imports slackened, “we may be left with no choice but to make it a little more expensive to import gold. This matter is under government’s consideration,” finance minister P Chidambaram said Wednesday.

He did not specify the measures planned to curb gold imports, which is one reasons along with crude oil imports for the current account deficit to climb to a record 5.4 per cent in the second quarter of this fiscal year. The deficit for the first half was 4.6 per cent.

The high deficit means India has to finance it through a surge in the inflow of foreign capital as direct investment or through capital markets or boost exports. These options are considered tough in the current weak global economic conditions.

Meanwhile, a Working Group of the Reserve Bank of India has proposed a host of steps to curtail the demand for gold. It has said that there is a need to revisit the debate on setting up of Gold Corporation or Gold Bank in India. Gold bonds and gold deposits schemes that may encourage gold holders to deposit their idle gold holdings with banks can be designed with an in-built tax incentives, it said.

“The impounded gold through gold bonds can be used to reduce the demand for gold imports,” it said.

However, the group is against any curb or limits on advances against gold jewellery and gold coins. Any restrictions on the loans against gold jewellery may lead to people going back to pawn brokers and money lenders to borrow, the RBI group said.

RBI recommends

* Gold Accumulation Plan, Gold Linked a/c, Modified Gold Deposit and Gold Pension Product may be introduced

* It has proposed products such as Modified Gold Deposit Scheme, Gold Accumulation Plan, Gold Certificate, e-Gold Plan

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