Centre hikes custom duty on gold, silver imports to 15 % amid PM Modis forex warning

PTC News Desk: The government on Wednesday increased import taxes on gold and silver from 6 per cent to 15 per cent. This comes just days after Prime Minister Narendra Modi asked people not to buy gold for a year because of economic pressure caused by the Iran war and the falling foreign exchange reserves.

The Centre introduced a 10 per cent basic customs duty and a 5 per cent Agriculture Infrastructure and Development Cess (AIDC). The move is aimed at reducing gold and silver imports, lowering the trade deficit, and helping strengthen the rupee, which has fallen to a record low of 95.75 against the US dollar.

The increase in import duty came even though a government source had told Reuters earlier this week that there were no immediate plans to raise taxes on gold and silver imports after Prime Minister Narendra Modi appealed to people to avoid buying gold.

India, the world’s second-biggest consumer of gold and the largest consumer of silver, depends heavily on imports to meet local demand. The higher duty is likely to reduce demand, especially when gold and silver prices are already very high.

Gold demand in India has risen sharply over the past year because prices have been increasing and stock market returns have remained weak. According to the World Gold Council, investments in India’s gold exchange-traded funds (ETFs) rose 186 per cent year-on-year in the March quarter, reaching a record 20 metric tonnes.

Surendra Mehta, national secretary of the India Bullion and Jewellers Association, said the government’s decision was expected as it wants to control the current account deficit. However, he added that the higher duty could hurt demand since gold and silver prices were already expensive.