Gold and silver prices are set to soar further as the government has changed the duty structure on precious metals from specific to value-linked, enabling the exchequer to rake in an additional Rs 600 crore during the remaining months of the financial year.
The ad-valorem rates of excise and customs on precious metals like gold, silver and platinum have come into effect from Tuesday, said a government notification. Diamonds, too, will now attract an import duty of 2 per cent.
According to the changes, customs and excise duty will now be levied on the value of the precious metals instead of a fixed amount, meaning that the incidence of duty will move up with the rise in prices of the goods, thereby making them more expensive.
According to the notification, the import duty on gold has been fixed at 2 per cent of the value, instead of the earlier rate of Rs 300 per 10 grams. On silver, the import duty has been pegged at 6 per cent, as against Rs 1,500 per kg earlier.
With respect to excise, the duty on gold has been fixed at 1.5 per cent of the value, as against the earlier fixed rate of Rs 200 per 10 grams. Silver will attract excise of 4 per cent, as compared to a fixed duty earlier of Rs 1,000 per kg.
"The old rates were fixed 4-5 years ago. In the last few years, prices have increased substantially so the change has been made to bring duties in line with market prices," said Central Board of Excise and Customs (CBEC) Chairman S K Goel.
According to Finance Ministry estimates, "The increase in the duty is expected to fetch an additional Rs 500-600 crore for the balance fiscal year."
Gold prices firmed up by Rs 35 to Rs 27,925 per 10 grams in the bullion market on Tuesday, while silver gained Rs 575 to Rs 52,725 per kg.
"The change in duty structure will help control the burgeoning current account deficit," a Finance Ministry official said.
Last fiscal, import duty on gold raked in Rs 2,500 crore for the exchequer, while the levy on silver mopped up Rs 300 crore.
During April-December 2011, gold and silver imports were up by 53.8 per cent at $45.5 billion.
"The move will help increase revenue collection from duties. This will help control the sector, although I do not see any impact on imports," KPMG Senior Manager Rahul Shukla said.
India imported 958 tonnes of gold in 2010. During the first half of 2011, imports of the yellow metal stood at 553 tonnes, despite hardening prices.
Gold and silver imports grew by 54 per cent to $45.5 billion (about Rs 2.36 lakh crore) between April and December 2011.
According to estimates of the World Gold Council, the Indian government earned around Rs 2,836.6 crore in 2010 from import duty on gold.
During 2011, gold prices crossed the Rs 29,000 per 10 grams-level to a historic high of Rs 29,155 per 10 grams on December 8, 2011, on good local demand in view of the marriage season, coupled with investment buying due to weak equity markets.
On the other hand, silver prices hit an all-time high of Rs 75,020 per kilogram on April 25, 2011, on heavy speculative and investment-driven buying in line with global markets, where the metal rose to a fresh 31-year high.
- with inputs from PTI