Jewellers in India, the biggest bullion buyer, plan to suspend the longest nation-wide strike after the government said it would delay the implementation of an increase in excise duty on non-branded ornaments.
“We have appealed to our members to open shops from April 2 after the government assured us that no jeweller will be forced to register to pay excise duty,” said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation. “The finance ministry has written to us saying that no coercive action will be taken.”
The jewellers have been on a two-week strike after finance minister Pranab Mukherjee announced on March 16 that non-branded gold jewellery will attract a one per cent levy for the first time. The minister also raised the import duty on gold for a second time this year as part of measures to rein in the current account deficit, partly stoked by record bullion purchases.
The end to the shutdown may revive demand in the world’s largest consumer in 2011, helping sustain the 6.4 per cent rally in gold prices this year. The precious metal is climbing for a 12th year as the sovereign-debt crisis in Europe and concerns that global economic growth may slow spurred demand for a protection of wealth.
“Demand should return a little bit,” Bamalwa said. “Imports may not be resumed immediately as banks have enough stockpiles. With high import tax and uncertainties, there will not be bulk purchases.”
Lower imports
Mukherjee raised the import duty on gold bars and coins and platinum to four per cent from two per cent, after doubling the tax in January.
A levy on gold ore, concentrate and so-called dore bars for refining will be doubled to two per cent and an excise tax on refined gold will climb to three per cent from 1.5 per cent, he said.
Mukherjee said on March 27 the government would set an “acceptable formula” on the levy.
“India’s gold imports will plunge as much as 59 per cent to about 125 tonnes in the three months through March as the tax increases boost retail prices by more than six per cent,” Prithviraj Kothari, president of the Bombay Bullion Association, had said on March 26. That compares with 306 tonnes imported a year earlier, according to data from the World Gold Council.
Kothari has predicted a 35 per cent slump in purchases in 2012, from last year’s record 969 tonnes.
