Government hikes import tax on gold, silver

With India raising the import tax on gold and silver yesterday, local prices of the metals are expected to rise and depress demand in the country, which is the largest consumer of the two precious metals.

The finance ministry said in a statement that gold imports would now be taxed at 2 per cent of value from a flat rate of Rs300 per 10 grams previously and silver imports at 6 per cent from the earlier flat rate of 1,500 rupees a kilogram.

Though no further details were given, the change in the duty structure is expected to raise import taxes in absolute terms as gold is currently priced around Rs27,500 per 10 grams while silver prices are close to Rs53,500 a kilogram.

As India's demand for the metals is met largely through imports, the increase in taxes, according to analysts is significant. India imported between 850 tons and 900 tons of gold in 2011.

Expressing concerns over the tax increase, the bullion industry said the computation method had now become more complex and could delay imports.

According to Prithviraj Kothari, president of the Bombay Bullion Association, an increase in the flat rate of tax rather than a percentage of the value would have been much better.