The finance ministry has raised import duties on gold to 15% from 10%. The higher tariffs, which took effect on Monday, are aimed at curbing the surge in imports of the yellow metal.
Gold imports spiked 95% to $7.2 billion in October, causing the merchandise trade deficit to rise to an all-time high monthly figure of $31.46 billion. Though imports of the metal moderated in November, there was again a 156% increase to $3.03 billion in December on a low base.
In July last year, India had banned imports of certain gold jewellery, in the wake of sudden rise in duty-free imports of these items from Indonesia, under the India-Asean free trade agreement (FTA).
The latest set of measures also includes a similar hike in import duties on silver findings and coins of precious metals. The new 15% duty includes a 10% basic customs duty (BCD) and an additional 5% under the all-industry duty drawback (AIDC), with an exemption from the social welfare surcharge (SWS).
Basic customs duty is a standard duty levied on imported goods and denotes the import tariff. The AIDC is an additional duty imposed to offset the impact of other duties or taxes on the production cost, while SWS is a surcharge imposed in order to finance welfare schemes.
Reports suggest the duties were raised also to prevent circumvention of the duty on gold and silver bars – which at present stands at 15%. According to commerce ministry data, gold imports in terms of value and volume have grown 86% and 63%, respectively, in the October-December quarter of FY24 – which is higher than the average of 27% and 15% of April-December FY24.
In October, gold imports peaked – in the current fiscal – at $7.23 billion, which was 95% higher from last year, and contributed to shooting up the trade deficit during the month. During October, India’s merchandise trade deficit stood at a record high of $31.46 billion.
“In October, there was a surge in gold import volumes which was linked with festival related demand as well as catch-up demand as import volumes had declined in FY23 and has remained relatively subdued in H1FY24,” said Gaura Sen Gupta, economist, IDFC FIRST Bank.
Gold or silver findings mean a small component such as hook, clasp, clamp, pin, catch, screw back, which is used to hold the whole or a part of a piece of jewellery in place.
