Government to spare gold from higher tax, mulls deposit scheme to cut its imports

NEW DELHI: The government is likely to increase import duties on precious stones, certain types of steel and electronics but will spare gold to prevent smuggling, news agency Reuters reported on Monday quoting a finance ministry official.
The official, who declined to be named, told reporters the main reason for the planned increase in duties is to curb an inflow of items that normally move between China and the United States, but could be redirected because of the tariffs imposed by the two countries.
News agency Bloomberg reported that jewellers breathed a sigh of relief on the likely decision. Gold futures in Mumbai rose and shares of Titan Co., India’s largest maker of branded jewelry by market value, pared losses.
With reports floating around that the government may tinker with the duties to curb a widening current account deficit and arrest the rupee’s fall in line with similar measures taken in 2013, jewellers feared that any increase in tax would hit demand during the ongoing peak festival and wedding season.
The finance ministry is also reportedly planning a gold deposit programme aimed at attracting bullion lying with citizens. Apart from this, an inter-ministerial group last week also discussed steps to attract gold deposits from temple trusts, sources said to Bloomberg.

The deposit programme is aimed at cutting imports of the metal by recycling it inside the country, reported Reuters.
India is the world’s second-biggest gold buyer after China and imports almost all the gold it consumes. The country spent $3.64 billion on such imports last month.

Meanwhile, government is also trying to curb imports of “non-essential” items to support the rupee, Asia’s worst performing currency.
Moreover, Indian oil refiners could cut back their imports and rely more on cheaper crude already stored in inventories to limit the outflow of dollars, Reuters reported on Monday.