The Indian government Tuesday hiked customs duties on gold, platinum and silver to 10 percent to curb imports and lower the current account deficit.
This led to a recovery in the rupee. The partially convertible rupee closed at 61.19 per dollar compared to 61.27 Monday.
Customs duty on gold and platinum has been increased to 10 percent from earlier rate of eight percent. Duty on silver is hiked to 10 percent from six percent, the finance ministry said in a statement.
Notifications for the new duty structure was laid in Parliament.
The notifications were issued a day after Finance Minster P Chidambaram underlined the need for compression in the import of gold and silver to curb the current account deficit, which largely responsible for the rupee depreciation.
"As a part of measures towards containing the current account deficit, the customs duty on gold and platinum has been increased from 8 percent to 10 percent and on silver from 6 percent to 10 percent," the ministry said.
This is the third increase in duties on gold imports in the past eight months.
Import duty on standard gold (of purity 99.5 percent and above) was Rs.300 per 10 gm until Jan 16, 2012. The duty was raised to 2 percent from Jan 17, 2012; thereafter, it was hiked to 4 percent in the Budget 2012-13.
Import duty on gold was raised to 6 percent with effect from Jan 21, 2013 and it was further hiked to 8 percent with effect from June 5, 2013.
"The basic purpose of enhancing the duty was to curb the import of gold," the ministry said.
The duty rates for silver were last revised Jan 17, 2012. It was raised to 6 percent effective from Jan 17, 2012 from earlier duty of Rs.1,500 per kg.
Despite the duty hike, imports of the precious metal continue to rise. India is the largest importer and consumer of gold.
In quantitative terms, the imports of gold jumped by 87 percent to 383 million tonnes in April-July 2013 from 205 million tonnes recorded in the corresponding period last year.
In value terms, the imports increased from Rs.56,488 crore to Rs. 95,092 crore during the period under review, posting an increase of about 68 percent.
The quantity of gold imported during 2012-13 was 845 million tonnes valued at Rs.2,45,862 crore.
