Customs duty on gold, silver and platinum was Tuesday hiked to 10 per cent in third revision this year in a bid to curb the surging imports and burgeoning CAD, a decision that will also rake in an additional Rs 48.30 billion to the exchequer.
While the duty on gold and platinum was raised from 8 per cent to 10 per cent, the levy on silver was hiked by 4 per cent, according to the notifications tabled in Parliament by Finance Minister P Chidambaram.
Revenue Secretary Sumit Bose told reporters later that government was still working on the proposed hike in import duties on non-essential goods, an indication of which was given by Chidambaram on Monday.
He said the basic purpose of enhancing the duty was to curb the import of the precious metals to check the Current Account Deficit (CAD) and not to raise money.
Shortly after the hike was notified, bullion traders said the price of gold will go up by Rs 600 per 10 gms. Continuing its rising streak for the fifth straight day, gold prices rallied to a four-month high by rising Rs 565 to Rs 29,825 per ten grams in Delhi.
This is the third time that the government has raised the duty on gold this year with a view to containing its imports, mainly responsible for spurt in CAD which touched at a record high of 4.8 per cent in 2012-13.
Import of gold went up by a huge 87 per cent from 205 tonnes in April-July 2012 to 383 tonnes during the corresponding period this year. In value terms, the increase was 68 per cent from Rs 564.88 billion to Rs 950.92 billion.
In the case of silver, import during April-July 2013 was valued at Rs 127.89 billion in comparison with Rs 42.81 billion during the corresponding period year ago, registering a 200 per cent increase.
The decision to raise duties follows announcement made by
Chidambaram on Monday that government would take steps to compress the demand of precious metals, oil and non-essential goods to contain CAD at $70 billion or 3.7 per cent of GDP in 2013-14. It was $88.2 billion or 4.8 per cent of GDP last fiscal.
Consequentially, adjustments in customs duties were being made on gold ore/concentrate, gold dore bar and silver dore bar.
Thus, additional duty of customs (countervailing duty) on gold dore bars and on gold ore/concentrate is being increased from 6 per cent to 8 per cent and on silver dore bar from 3 per cent to 7 per cent.
Pursuant to these changes, excise duty on refined gold bars produced from ores and concentrates and from copper smelting is being raised from 7 per cent to 9 per cent.
Likewise, excise duty on silver manufactured from silver ore or concentrate, silver/gold dore bars or from copper, zinc or lead smelting is being increased from 4 per cent to 8 per cent.
The government in January hiked duty on gold from 4 to 6 per cent and later in June raised it further to 8 per cent.
India imported 845 tonnes of gold valued at over Rs 2.45 trillion in 2012-13. The quantity of silver imported during 2012-13 was 1,963 tonnes valued at Rs 106.91 billion.
Chidambaram had on Monday that one of the main challenges before the economy was to deal with the CAD, which is the difference between inflow and outflow of foreign currency, was $88.2 billion or 4.8 per cent in 2012-13.
A high CAD impacts the value of currency which in turn makes imports expensive and adds to the fiscal deficit.
The Minister had emphasised that 3.7 per cent CAD in 2013-14 is a "red-line" and will not be breached under any circumstances.
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