Tax on Gold Import Dissuades Buyers

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[ic_bing_image keyword=”gold”][ic_spinrewriter ]The Central government has raised the import tax on gold by two percentage points to 6 percent to curb purchases and rein in a ballooning fiscal deficit, however the move has left buyers disappointed.

India’s passion for gold has ended in an increase in its current account deficit, which reached an all-time high of five.4 percent of gross domestic product within the July-September quarter.

Alarmed by the mounting current account deficit, driven by large-scale gold imports, the govt. raised the import duty on gold and platinum to 6 percent from four percent.

The jewellers in eastern Siliguri city were upset with the step.

They said on Tuesday that their business was already running low as a result of high prices of gold and this move will put an end to their business, because the poor and middle class people does not be capable of afford the yellow metal and the wealthy class would head to the showrooms.

“The business was already running low as a result of the high prices of gold and with the increase of import duty, the costs will escalate, have a nasty impact at the business,” said jeweller Suman Kumar Paul.

The widening current account deficit has increased India’s need for foreign capital inflows and evoked memories of the 1991 balance of payments crisis, when the Reserve Bank of India (RBI) sent 47 tonnes of gold to Europe as collateral for a loan to avert a sovereign default.

India have been combating a trade deficit that has put the country’s current account balance stressed. To restore exports, the govt last month extended an interest subsidy scheme for some exporters.

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Gold Buyers Now Price Sensitive

The customers said they’re unable to afford gold even for weddings or occasions.

“We face problems as we’re unable to afford out desired designs. The upward push in prices of gold has made life tough for the poor as they’re unable to afford gold during marriages or every other occasion,” said a customer, Sumitra Gupta.

India vies with China as top global consumer of gold, and with nearly all demand covered by imports, the country’s purchases are a significant factor in global prices.

Finance Minister P. Chidambaram had hinted at a rise in tax on January 02, triggering an enormous jump in imports, which traders estimate at about 40-50 tonnes within the first week of the month. Premiums charged on London prices rose to the top level in two months to $2-3 an oz. (ANI)