India boosts tax on gold imports

INDIA, the world's largest gold buyer, increased a tax on bullion imports to curb a record current-account deficit at a time when the World Gold Council predicts an all-time high quarterly demand for the metal.

Source from (Business Times): http://www.btimes.com.my/Current_News/BTIMES/articles/ingold/Article/index_html
Published: Jun 07, 2013

The duty will rise to eight per cent from six per cent, effective immediately, Revenue Secretary Sumit Bose said in a telephone interview here yesterday. Before the move, India had tripled the tax since January last year.

Gold imports may fall as much as 20 per cent this year, the All India Gems & Jewellery Trade Federation said. The levy on platinum imports was also increased to eight per cent from six per cent.

Gold's slump to a two-year low in April boosted demand for jewellery from Asia. The tax increase is the latest by India to curb the appetite for the precious metal among the nation's 1.2 billion population, for uses ranging from wedding jewellery to a hedge against consumer-price inflation.

Such demand contributed to a US$32.6 billion (RM100.5 billion) current-account gap in the last quarter of 2012, equivalent to a record 6.7 per cent of gross domestic product.

Gold for immediate delivery dropped 0.7 per cent to US$1,394.10 an ounce at 1.28pm in Mumbai, down 17 per cent in dollar terms this year compared with an 11 per cent drop in rupees. The dollar price reached a two-year low of US$1,321.95 on April 16 after rallying for the past 12 years in the longest bull run in at least nine decades.

India's gold imports will be 300 to 400 tonnes in the second quarter, almost half of total shipments for all of last year, the London-based World Gold Council said in a May 29 report.

Inward shipments may decline by as much as 20 per cent in 2013 after the increased levy, Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation, said by telephone from Kolkata.

Gold imports aren't sustainable and India must curtail them, Finance Minister Palaniappan Chidambaram said in Mumbai yesterday.

He urged banks to refrain from encouraging purchases of the metal, saying the country's overall economic situation isn't very promising, with investment still weak.

The government this week sold inflation-linked bonds for the first time in 15 years, to provide investors with an alternative to gold as a buffer against inflation. Bloomberg