Gold sales declined 20 per cent in Mumbai’s Zaveri Bazaar on Tuesday as retail investors preferred fund diversion from precious metals to equity market.
Sensex’s fresh lows of around 14000 points offered fresh opportunity for investors to pump in money for better return in future. Since, the Finance Minister in the Union Budget had hoped for the economy to grow faster than last year despite other best-performing economies are pushing down, retail investors shifted their fund from precious metals to equity market, said Ketan Shroff of Pushpak Bullions, a gold retailer and member of the Bombay Bullion Association.
Gold continued to range between Rs 14,000 - 14,500 per 10 gm ($900 - $950) on weak dollar and firm guidance from global market. Higher price is another factor for investors’ absence from fresh buying, Shroff added.
Explaining the need for a revision in the levy on precious metals because of manifold increase in prices, the Finance Minister in the Budget 2009 - 10 doubled customs duty on the import of gold and silver.
Taking 2004 as base when customs duty was levied on precious metals, the minister raised import duty on serially numbered gold bars (other than tola bars) and gold coins from Rs 100 per 10 gm to Rs 200 per 10 gm.
Similarly, the customs duty on other forms of gold (excluding jewellery) has been raised from Rs 250 per 10 gm to Rs 500 per 10 gm.
Along the same lines, the government also raised import duty on silver (excluding jewellery) from Rs 500 per kg to Rs 1,000 per kg explaining that these rates were fixed in 2004 and have not been reviewed even as the price of gold has increased several times.
Bhargav Vaidya, an analyst with the Mumbai-based precious metals research firm B N Vaidya & Associates, said, “The duty on gold is in line with expectation but on silver it is a bit surprise.”
“The only disappointment for us is the use of the fund raised through additional levy. We had sought to use the fund for the welfare of gold artisans which, it seems, is absent from the provision,” Vaidya said.
Suresh Hundia, the president of Bombay Bullion Association (BBA), commented that the levy was unlikely to fetch additional revenue to the government as the measure will make gold product costlier thereby, chances of declining sales in the domestic market. Hundia also added that the import of gold will decline further due to the increase in import duty. India’s gold import during the calendar year 2008 dipped 45 per cent to 450 tonnes.
When customs duty was levied at Rs 100 per 10 gm in 2004, gold was hovering around Rs 5,000 per 10 gm. Since the yellow metal has jumped three times since then, buyers will happily accept the revised price, said Prithviraj Kothari, director of Riddhi Siddhi Bullion, a Mumbai-based bullion trading firm.
These revised rates would also be applicable to gold and silver, including ornaments that are not studded, when imported by a bonafide passenger as baggage.
