The minister also raised the import duty on gold for a second time this year as part of measures to rein in the current account deficit, partly stoked by record bullion purchases. The precious metal has been climbing for a 12th year as the sovereign-debt crisis in Europe and concerns that global economic growth may slow spurred demand for a protection of wealth.
Mukherjee raised the import duty on gold bars and coins and platinum to four per cent from two per cent, after doubling the tax in January.
A levy on gold ore, concentrate and so-called doré bars for refining will be doubled to two per cent and an excise tax on refined gold will climb to three per cent from 1.5 per cent, he said.
After the Minister’s announcement of March 16th, the Indian Jewellers artisans went on strike to protest against the new tax.
With Artisans not buying gold India’s gold imports is expected to plunge as much as 59 per cent to about 125 tonnes in the three months through March as the tax increases boost retail prices by more than six per cent, and put a lid on the demand. That compares with 306 tonnes of gold imported during the same period a year earlier, according to data from the World Gold Council.
Rather than collecting increased taxes from Gold trading business owners, India lost huge tax revenue with the on set of strike.
After two weeks, with falling tax revenue, the Minister backtracked on his new tax and promised that it will delay the implementation of an increase in excise duty on non-branded and no action will be taken against the Jewellers in India for not collecting the one percent tax.
This was an amazing win for small business owners in India. Jewellers in India, the world’s biggest bullion buyer, agreed to open shops from April 2, 2012 and suspend the longest nationwide strike ever by Jewellers.
But the damage to the national revenue has already been done by the Finance Minister.
“Imports may not be resumed immediately as banks have enough stockpiles. With high import tax and uncertainties, there will not be bulk purchases.” The gold import in India may fall 35% from the previous year.