Govt hikes import duty on raw gold to 5%
India more than doubled the import duty on gold dore bars and ores on Tuesday, hard on the heels of a hike in taxes on refined gold, as the government tries to curb demand in the world's biggest importer of bullion and rein in a record current account deficit.
The country's gold imports total about 800 tonnes a year. The government hiked the import duty on gold dore bars to 5 per cent from 2 per cent. Dore, an alloy of gold and silver that is used by refineries to produce pure gold, accounts for about 100 tonnes of annual imports.
The move came one day after the government increased import tax on gold to 6 per cent from 4 per cent, aiming at closing the gap on import duties on bullion bars and dore, which had become an attractive import since last year after the government hiked tax on gold imports to 4 per cent.
"It was a duty arbitrage that they have plugged," said Shekhar Bhandari, executive vice president of treasury at Kotak Mahindra Bank. "Otherwise people would not import through normal channels but import dore bars."
Gold mines often process their gold-bearing ore on site and send dore bars to gold refineries to be processed into tradeable bars of high purity at 99.5 per cent or more.