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Govt slashes tariff value on imported gold, silver

03 Jan 2014 Evaluate

The government has slashed the import tariff value of gold to $392 per 10 gram from $398 and silver to $638 per kg from $643 per kg, in line with global rates of the precious metals, which could lead to some softening in the price of the precious metal. Tariff value or the base price is set to determine the customs duty on the precious metal and to prevent under invoicing.

India is the largest importer of gold, which is mainly utilised to meet the demand of the jewellery industry. At present, despite fall in global gold prices, it is being sold at a high premium in domestic market owing to the government measures to restrict the import of the precious metal in an effort to check country’s widening current account deficit (CAD). Meanwhile, the steps taken by the government has started yielding as Indian gold and silver imports has been witnessing declining trend over the past few months. During the first eight months (April-November) of the current financial year, gold and silver imports contracted by 23.8% to $25.5 billion, which also helped to contain the CAD at $5.2 billion, or 1.2% of GDP in Q2 FY14 as against the 4.9% of GDP in the Q1 FY14. India’s gold import is likely to come down to between 800-850 tonnes in current fiscal from 950 tonnes in FY13.

Amid rising concerns over declining gems and jewellery exports, recently, Commerce Ministry has sought for easing restrictions on import of gold imposed by the RBI citing that the central bank has laid down various pre-conditions for inward shipment of the precious metal such as 80/20 rule under which 20% of all gold imports by importers has to be re-exported. Gems and jewellery sector is a major consumer of imported gold and accounts for about 15 per cent of country’s total exports.

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