- Date : 11/07/2022
- Read: 3 mins
There has been a continuous fluctuation in the gold market. Recently the Government of India increased the import duties on gold from 10.75% to 15% marking a 5% increase. The government took this step to check the rising imports and CAD (Current Account Deficit).
What is an Import Duty?
Import duty is the taxes collected by the customs authorities when goods are brought into our country from another country. Import duty varies depending upon the number of goods, so sometimes it may also be referred to as customs duty, import tariff, import tax or tariff. The primary purpose of imposing import duty is to create revenue and, at the same time, preserve the goods against the influence of the goods of a foreign country. The government increases import duties, so the buyers will be motivated to support domestic goods as the latter will become less beneficial.
Hike in Prices of Gold Import Duties
India is ranked as the second-largest country consuming gold. The Indian government raised the import duty from 10.75% to 15% on gold on Thursday. In terms of gold consumption, India comes second rank, following China. Most of the country's gold requirement is satisfied by imports, primarily through the jewellery industry. The attempt was made to inspect the deficits in the current account amongst the increment in the yellow metal imports. It was a surprise move to increase import duty by 5% to control the extending trade deficit and stem the sharp reduction in the rupee. Compared to the previous year, the data shows that imports in terms of gold may have risen nearly nine times.
The reason behind such an increase in the gold price was to overcome the falling value of the Indian rupee. There has been a continuous downfall in the rupee against the US dollar; therefore, the government increased the import duty on gold to overcome it. However, this decision might affect the jewellers negatively. Thus, the Indian jewellers asked the government to re-examine their decision. There might also be an increase in the smuggling of gold due to such heavy import taxes. Due to this rise, the gold prices have also increased up to 1000 INR for 22-carat.
To know more about the hikes of gold prices:
As we know, that India is ranked as the second-largest country consuming gold. Therefore, Indian government usually takes several steps to promote and encourage the domestic market against the foreign market. Recently, India has incremented import duty on a commodity that is gold. The action was taken by our finance minister Nirmala Sitharaman to maintain a balance in import-export and also to control imports. Indians acknowledge gold to be optimistic and also as a store of value. India depends wholly on imports to fulfil the demand; thus, the import duty levied on gold has increased to approximately 15%.
Disclaimer: This article is meant for general financial purposes only. You must not take it as any form of legal or taxation or investment or insurance advice. You must seek separate independent advice when indulging in financial decision-making.