Duty on gold may rise to 6% to discourage imports

Gold duty

The government plans to make gold imports more expensive by increasing import duty.

The basic customs duty on gold and platinum could be raised to 6 per cent from 4 per cent, said a government source. The increase will be the second straight one on standard gold and platinum bars in two years. The duty was raised to 4 per cent in the last budget while the rate on gold coins was doubled to 10 per cent.

Unless the pace of gold imports slackened, "we may be left with no choice but to make it a little more expensive to import gold. This matter is under government's consideration," Finance minister P Chidambaram said Wednesday.

He did not specify the measures planned to curb gold imports, which is one of the reasons along with crude oil imports for the current account deficit to climb to a record 5.4 per cent in the second quarter of this fiscal year. The deficit for the first half was 4.6 per cent.

The high deficit means India has to finance it through a surge in the inflow of foreign capital as direct investment or through capital markets or boost exports. These options are considered tough in the current weak global economic conditions.

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