Import tax on gold hiked from 7.5% to 12.5% to curb shipments

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The government has raised the basic import tax on gold to 12.5 per cent from 7.5 per cent. The step has been taken in an effort to curb imports, as the rupee slumped to a record low.

The imports of gold totaled 107 tonnes in May and shipments are also likely to have been significant in June.

India, the world’s second biggest consumer of gold, is currently staring at higher trade and current account deficits amid volatile global macroeconomic conditions.

The country’s trade deficit in May ballooned to record high $24.29 billion. India imported gold worth $6.03 billion in May, a nine-fold rise from a year earlier.

India had imported the most amount of gold in a decade last year, as demand recovered after the pandemic. Raising import duties on goods is one way to curb imports by making them costlier. This step is a reversal of last year when Centre cut the tax to 7.5 per cent in the budget.

Earlier in the year, leading jewellers in the country had urged the government to reduce the import duty on gold from 7.5 per cent to four per cent in Budget 2022 to reduce gold smuggling.

Countries such as China, USA and Singapore had done away with the import duty on gold to strengthen the domestic market.