Last Updated : 18 February 2011 at 15:20 IST
India to raise import duty on gold, silver
Soaring demand for gold and silver among investors in India may force the federal government to raise the import duty on precious metals in the coming annual budget. India’s annual budget is to be presented in the Parliament on February 29. Officials in the Ministry of Finance said that the government has decided to hike the import duty on gold and silver thanks to the surging demand for these precious metals.
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NEW DELHI (Commodity Online): Soaring demand for gold and silver among investors in India may force the federal government to raise the import duty on precious metals in the coming annual budget.
Read New Story: India increases import duty on gold by 2%, silver 6 % in 2012
India’s annual budget is to be presented in the Parliament on February 28. Officials in the Ministry of Finance said that the government has decided to hike the duty on gold and silver imports thanks to the surging demand for these precious metals.
“Finance Minister Pranab Mukherjee has mooted the proposal to hike the import duty on gold and silver. Imports of these precious metals have been very strong in the last one year, and the rising demand for precious metals is the main reason for the hike in the import duty,” a senior official said.
Despite the rising prices of gold and silver, the government has been increasing the import duty on these precious metals in the last two years. India is the largest consumer and importer of gold and silver in the world. In the Gold Demand Trends released on Wednesday, the World Gold Council (WGC) said that India has the strongest gold market in the world.
Presenting the India Budget 2009-10, Mukherjee had increased import duty on gold bars from Rs 100 per 10 gram to Rs 200 per 10 gram, while duty on other forms of gold (excluding jewellery) was increased from Rs 250 per 10 gram to Rs 500 per 10 gram.
The customs duty on silver was increased from Rs 500 per kg to Rs 1,000 per kg. The duty on gold and silver was not been reviewed since 2004 even though prices have increased manifold, the finance minister then said.
In 2010 annual budget, the government increased the import duty on gold for the second time to 300 rupees per 10 grams from 200 rupees earlier, and import duty on silver raised to Rs 1,500 per kg from Rs 1,000 earlier.
Karun Varma, a bullion dealer in New Delhi said that the big rise in the prices of precious metals is prompting the government to increase the import duty on gold and silver.
According to Ajay Mitra, managing director, Middle East & India , WGC: "The government could raise the import duty on gold in the budget for FY12 since high prices did not deter consumers from making a record purchase of 745.7 tonne jewellery last year."
He further added that "The high demand resulted in the country importing 918 tonne, the highest in a year so far. However, I don't see demand being hit since the duty calculated on a per gram basis works out to just Rs 300." As a result, the demand for gold bars, jewellery and coins will not be affected due to the increase in import duty. However, this trend will help the government to earn additional revenues by increasing the import duty.
According to estimates of WGC, Indian government earned around Rs 2836.6 crore in 2010 as an import duty on gold. In 2010, the import duty stood at Rs 30,900 per kg. In 2010, Indian consumers consumed approximately 963.1 tonne of gold prized at Rs 1.73 lakh crore, representing a YoY growth of around 66%.
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