India Raises Gold Import Tax on gold jewelry to 15 percent to from percent, a massive increase by industry standards. This raises in import is an attempt to further reduce gold imports to help lower the country's deficit. India is the world's top gold consumer. By keeping the import tax on jewelry higher than that of bullion. They hope price-conscious consumers would be forced to buy those manufactured within India. While the tax hike is part of India's efforts to curb gold imports, it's unlikely to have a significant impact. This is because jewelry accounts for only a small portion of the country's gold imports.
India Raises Gold Import Tax on Bullion
In August of 2013 the country raised the import tax on bullion to 10 percent from 8 percent. However, they kept the gold jewelry tax unchanged. Government measures taken in the past 18 months to contain gold imports have resulted in reduced imports. This according to the State Bank of India (SBI). Gold imports declined to 650 million by value in August compared with 2.97 billion in July. India's gold imports so far this tear have fallen to 21.9 billion. This by value compared with 53.8 billion one year ago. The sources being the bank. India's finance minister is quoted as saying, "To protect the interests of small artisans, the customs duty on articles of jewelry ... is being increased."
The country has taken several steps this year. Including raising the tax on bullion imports three times. Additionally, the idea was to curb demand for the precious metal to reduce its trade deficit and support a weak rupee. Gold is the biggest non-essential item in India's import bill. While gold jewelry imports represent less than 10 percent of overall gold imports, this will add to the negative sentiment present in gold at the moment," ANZ analysts wrote in a note.
Gold Prices Falling
India Raises Gold Import Tax while gold just below $1,300 an ounce. Additionally, spot gold is down 22 percent for the year and is predicted that it is headed for its first decline in 13 years. As investors brace for a pullback in the U.S. Federal Reserve's economic stimulus that has burnished the metal's inflation-hedge appeal and helped lift it to a record high above $1,900 in 2011. Moreover, the hike in the duty on jewelry was demanded by the domestic industry on concerns over imports of cheaper jeweler from Thailand, Malaysia and elsewhere. "This is a good move for the local industry and it will support the manufacturing sector," said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation.
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India Raises Gold Import Tax to curb demand.