India raises import tax on gold to 12.5% from 7.5%


India has raised its basic import duty on gold to 12.5 per cent from 7.5 per cent, the government said on Friday, as the world's second biggest consumer of the precious metal tries to dampen its demand and bring down the trade deficit.

India fulfils most of its gold demand through imports, which were putting pressure on the rupee that hit a record low earlier on Friday.

The duty hike would lift prices and moderate demand in India, which could weigh on global prices. But it could stoke under-the-counter buying and drive-up appetite for precious metal smuggled into the country, trade officials said.

"The sudden rise in prices could bring down jewellery demand this month," said Prithviraj Kothari, managing director of RiddiSiddhi Bullions.

After the duty hike, dealers were offering a discount of up to $40 an ounce over official domestic prices — inclusive of the 12.5 per cent import and 3 per cent sales levies.

India's May trade deficit widened to $24.29 billion from $6.53 billion a year ago as gold imports in the month surged to $6 billion from 678 million a year ago. 

In the short-term gold demand could fall but in the long run demand would remain strong and imports would rebound, said Surendra Mehta, secretary at the India Bullion and Jewellers Association (IBJA).

After the duty announcement, local gold prices rose around 3 per cent, while global prices fell 0.5 per cent.

The hike has raised the gap between local and overseas prices to more than 15 per cent and this could boost smuggling of gold in the country, said a Mumbai-based dealer with a global trading firm.

"Smuggling was falling after the duty reduction and because of COVID-19 curbs on movement of people. But now it could rise again," the dealer said.

Shares of jewellery makers such as Titan, Kalyan Jewellers and Tribhovandas Bhimji Zaveri were down as much as 4 per cent in weak Mumbai market.

More from Business

  • Emirates announces codeshare with AEGEAN

    Emirates has announced a new codeshare partnership with AEGEAN, allowing its customers to benefit from increased connectivity to eight domestic Greek points via Athens using a single ticket.

  • Gulf Air to start flights to RAK International

    Gulf Air, the national carrier of Bahrain, will commence scheduled services to Ras Al Khaimah on October 3.

  • China cuts key lending rates

    China's economy unexpectedly slowed in July, data showed on Monday, with factory and retail activity squeezed by Beijing's zero-COVID policy and a property crisis, while the central bank surprised markets with key lending rates cuts to revive demand.

  • Saudi Aramco unveils record $48.4 billion Q2 profit

    Oil giant Saudi Aramco on Sunday unveiled record profits of $48.4 billion in the second quarter of 2022, after the war in Ukraine and a post-pandemic surge in demand sent crude prices soaring.

  • Potential hack for some Boeing planes fixed

    A digital vulnerability in the computer systems used on some Boeing aircraft that could have allowed malicious hackers to modify data and cause pilots to make dangerous miscalculations has been fixed.

Coming Up on Dubai Eye

  • Off Script with Chris, Robbie & Sonal

    5:00pm - 7:00pm

    The UAE’s alternative take on news, entertainment and sport. Join Chris, Robbie and Sonal as they cut through the clutter to bring you the news, entertainment and sport stories that actually matter.

  • Extra Time

    7:00pm - 8:00pm

    Chris & Robbie bring you the latest from the sporting world plus interviews with upcoming and legendary sporting stars.


On Dubai Eye