Gold import duty hiked to 6%, ETFs to earn on physical gold
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Hard-pressed to take urgent steps to curb gold imports feeding the current account deficit (CAD), the government on Monday hiked import duty on gold and platinum to 6% from 4% with immediate effect. The government also decided to allow mutual funds that provide gold exchange-traded funds (ETFs) to earn on the physical gold held by them. The funds will release a part of the gold held by them and deposit it with banks under the gold deposit scheme, and the latter would, in turn, release the gold to meet the requirements of the gems and jewellery industry.
Economic affairs secretary Arvind Mayaram said this would help reduce the demand for gold imports, but analysts warned that duty hike could increase smuggling. Currently, mutual funds do not earn any returns on the gold held by them under gold ETFs.
Also, the government has made the gold deposit scheme more attractive for individuals to deposit their idle gold with banks. The minimum quantity of gold that can be deposited with banks will be reduced and the minimum tenure of deposit will be cut to six months from the present stipulation of three years. As and when a customer seeks redemption, gold will be returned to them, Mayaram said, adding the entire exercise will not have any risks.
On Monday, gold traded at R30,935 per 10 grams. Following the import duty hike, gold prices went up by R315 to R31,250 per 10 grams in Delhi.
The duty changes (customs and excise) will be applicable on gold ore bars, gold ore and refined gold. "Duties will be reviewed after some time if there is a moderation in gold imports," Mayaram said. The finance ministry has also asked all its customs field officials to keep a strict vigil on gold smuggling.
These measures were taken in consultation with Sebi and RBI and these two regulators will soon modify their guidelines reflecting the changes in norms. Banks will notify the changes in the gold deposit scheme.
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