Union Government reduced the Import Tariff Value of Gold to USD 530 per 10 grams

The Union government on 23 March 2012 reduced the import tariff value of gold from USD 573 per 10 grams to USD 530 per 10 grams. The value was however kept unchanged at USD 1,036 per kg for silver imports. Gold after crude oil is the most imported commodity in India, the biggest consumer of gold in terms of value. India imported 967 tonnes of gold in 2011.

The import duty on gold was fixed at 2 per cent of the value, instead of the earlier rate of Rs 300 per 10 grams. On silver, the import duty was pegged at 6 per cent, as against Rs 1,500 per kg earlier.

The government had changed the duty structure on gold and silver from specific to value-linked in early 2012 thereby making precious metals more expensive.

The tax authorities in India also announced that a refund can be claimed on the 1% tax to be levied on cash transactions for buying gold or jewellery worth more than $3900 (Rs 200000). The refund was introduced to lure customers back to the bullion market.

Past price story

On July 3, 2009, taxes and duties as a percentage of the gold price in India was 1.9%. On 6 July 2012 taxes and duties was hiked to 2.7%, with a hike in custom duty. In the next instance it was observed that on 26 February 2010 taxes and duties as a percentage of the gold price in India jumped to 3.1% as a result of hike in customs duty though a day earlier on 25 February 2010 it had stood at 2.5%.

The change in custom duty brought down the taxes & duties to 2.4% on 16 January 2012. Immediately in the next day on 17 January 2012, with a 2% custom duty charge, taxes and duties as a percentage of the gold price shot up to 3.3%. Next on 15 March2012, taxes and duties as a percentage of the gold price was 3.3% and on 16 March 2012 with a doubling of custom duty, taxes and duties as a percentage of the gold price in India shot up to 5.3%.

Opposing the hikes

Bullion traders and jewellers opposed the March hikes in tariff value as it would hit demand given that the increased costs gets passed on to consumers. According to jewellers, demand from India slipped due to the prevailing high price of the yellow metal and that any demand compression was likely to further set to weaken global prices.

Tariff Value

The tariff value is the base price on which the customs duty is determined to prevent under-invoicing and discourage import of gold to ease pressure on balance of payments and is released fortnightly. The import tariff value, which is released fortnightly, is the base price on which the customs duty is determined and is used by the finance authorities to prevent under invoicing and to check the import of precious metals.