With the customs duty on gold and silver doubling in the Finance Act 2009, the price difference between imported gold and domestically-refined gold has widened to 3 - 3.5 per cent (per 10 gms) due to the additional taxation. This could lead to additional smuggling especially during periods of high demand, said Ajay Mitra, managing director — Indian subcontinent, WGC.
Terming the budgetary provisions “a double-edged sword”, the World Gold Council (WGC) warned that the rise in gold import duty will put additional pressure on the gold market, already suffering from high local prices and lower consumer spending.
“The Indian gold market is notoriously price sensitive. The recent depreciation in Indian rupee against US dollar coupled with the impact of global recession has been a significant dampener on the local gold demand. The government’s announcement is a double-edged sword and while we welcome the broader confidence-boosting package which we believe will help drive consumer spending, the addition to gold import duty will inevitably add the end consumer cost and impact gold demand,” Mitra added.
WGC had actively lobbied with the Indian Central Bank and Ministries of Finance and Commerce in the late 1990s to facilitate the free flow of gold into the country and in making a case for the rationalisation of import duties. The stabilisation of import duties enabled the secure development and growth of the Indian market through official channels.
