Import duty on gold hiked to 12.5% in Budget 2019

Dashing expectations that import duty on gold would be slashed to control the unofficial import of gold, the budget has hiked the import duty from 10% to 12.5%. “This has come as a shock,” says Ashok Minawala, Former Chairman, Gems & Jewellery Council. Praveen Singh, AVP, Fundamental Research – Commodities, Sharekhan Comtrade says “this is bad news for consumers and the industry”.

Will it encourage gold smuggling? Minawala thinks so. “The smuggled gold is estimated to be around 15-20% of the official gold imports. This move will make it more attractive,” he complains. However, Sudheesh Nambiath, Head, India Gold Policy Centre at IIMA thinks that a part of this incentive will be eliminated by the 2% TDS on cash withdrawals above Rs 1 crore from a bank.

Will investors in gold gain from this hike? No, because domestic gold price is more of a function of international gold price and dollar exchange rate. “This is a one-time hike and the market has already reacted to it. So there is no opportunity now,” says Singh.