Basic customs duty to stay at 10%
The Finance Ministry has turned down the Commerce Ministry’s pitch for a reduction in import duty on gold, citing improved data in respect of the current account deficit (CAD), official sources said.
Backing demands by gold traders, the Commerce Ministry had been keen on a 2-percentage point cut in gold import duty, either in phases, or in one go.
The Ministry had argued that since August 2013, when a runaway CAD led to the import duty being raised to 10 per cent — where it has remained ever since — the situation had improved, and there was a case for paring the levy. Moreover, such a move could lead to a drop in gold smuggling, it claimed.
In 2016-17, about 650 tonnes were imported into the country, resulting in tax revenues of about ₹20,000 crore. The World Gold Council (WGC) estimates that 120 tonnes of gold was smuggled into India in 2016.
Gold imports more than doubled in the first half this calendar year to 518.6 tonnes, the WGC said. They usually go up in the second half of the year, when festivals such as Diwali and Dussehra are celebrated.
The WGC has, however, pegged the full-year demand at 650-750 tonnes, lower than the 10-year average of 845 tonnes.
In its latest Gold Demand Trends Report, the industry-funded WGC said global demand for gold fell 14 per cent in the first half of this year, mainly on account of sharp decline in purchases by exchange-traded funds.
The GST on gold jewellery was recently pegged at 3 per cent, effective July 1. Prior to its implementation, the total levy stood at 12.4 per cent. With GST, it has risen marginally, to 14 per cent.