India Hikes Import Duty on Gold, Silver In Budget

According to analysts, the Indian government decided to impose some extra import tax on gold as the last time the government did it was in 2005 and at that time the price of gold was Rs 5,000 per 10 gm. Then a Rs-100/10gm import duty was imposed on yellow metal.

Things have changed a lot after that, especially in 2008-09, as far as gold is concerned. Gold prices are around Rs 15,000 per 10 gm now — three times more than the 2005 level. And demand for the commodity has gone up and the prices are expected to stay at that level considering the safe haven status of the yellow metal during the recession period.

So, if there is one major commodity which can be taxed that is gold. And, there is a strong case for a hike in import duty on gold to at least Rs 200/10 gm, which will ensure a revenue of Rs 1,200 crore for the exchequer, thinking that India imports about 600 tonnes of gold this year (There is a fall in imports following the rise in prices).

The gems and jewellery industry in India has been demanding the continuation of the existing credit limits to exporters with good track record, and improving credit facilities.

They had also demanded the introduction of Presumptive Tax/Turnover Tax as a permanent solution for the peculiar nature of the industry characterized by the daily price fluctuation which causes disputes on taxation.

The gems and jewellery industry had also sought rationalization of interest rate at par or below the international interest rates. It has been insisting that India's apex Reserve Bank should make dollar finance available at LIBOR + 1% to the banks financing the gem & jewellery industry up to 31st December 2011; as against LIBOR + 3.5% and extra charges of handling and commissioning.

India is the world's largest manufacturing centre for gems and jewelry and the Industry contributes over 12% to the total export earnings of the country and employs 1.5 million workers who are considered to be highly skilled and amongst the best in the world. The recent recession has rendered over 3-4 lakh workers jobless with many hanging up their tools to pursue other avenues.