Centre raises customs duty on gold to 12.5% from 7.5% – Times of India

NEW DELHI: The government has increased the import duty on gold from 7.5% to 12.5% as part of a strategy to discourage shipments into the country and check the widening trade deficit. The effective rate, after budgeting for the 2.5% agriculture infrastructure development cess (AIDC) adds up to 15%.
The higher duty pushed up domestic prices to over Rs 52,000/10gm on Friday, the highest level since April 25, according to Reuters data.
“Gold is inelastic in its demand. So, you would want to see whether you can at least try to discourage to that extent people (are) importing. Or, if you are importing and you still want to import, please pay that much more so that the country can have some revenue,” FM Nirmala Sitharaman said on Friday, a day after the duty changes were notified.
India’s trade deficit widened to a record $23.3 billion during May due to a surge in imports, while export growth moderated. During the month, gold shipments had surged nearly nine times to over $6 billion.
The levy comes at a time when the Centre is looking to raise resources to meet its higher expenditure commitment and rein in the fiscal deficit. Market players are, however, worried over the adverse impact of higher levies and expect smuggling of gold to increase further.
For a long time, gold imports were allowed duty free. The UPA regime, however, imposed customs duty to discourage purchases, something that the Modi government has continued with. While consumer behaviour has not changed, smuggling has gone up with seizures being reported almost daily. Besides, customs authorities treat every passenger arriving from Gulf nations as a suspect making the green channel redundant