InvestorQ : What is the highest import duty on gold and how would it impact the jewellery stocks in India?
Arusha Ray made post

What is the highest import duty on gold and how would it impact the jewellery stocks in India?

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1 month ago
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With monthly gold imports crossing $6 billion on a consistent basis, the government has been worried about the overt impact that gold is having on the trade deficit. To offset this impact, it announced a sharp spike in the import duties on gold. The government has hiked the basic Customs duty on gold by 5%. However, this will also come with the removal of the 75 bps cess so the net impact would be 4.25%. Effective, the duties on gold will go up from 10.25% to 15% in one go, which is a steep hike in duties on gold.

In FY22, the gold imports accounted for more than 8% of the total import bill and is a worry due to its unproductive nature. It is not like importing electronic raw materials or even machinery. Government has also hiked the import duty on gold for refineries from 6.9% to 11.85%. However, the World Gold council is far from happy. They think it is OK as a temporary measure but otherwise it would only encourage the smuggling of gold and create a thriving grey market for gold in India via Dubai and Singapore.

Broadly, the sharp spike in import duty on gold will hit jewellery sales in a market like India that is price sensitive. However, a weak rupee may cushion some of the price impact of higher duties, which is evident in the way price of gold did not rise too much. The immediate impact was also limited due to inventories of gold. But in the medium term, the impact will be visible.

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