India’s Trade Ministry has sought a sharp cut in the import tax on gold, a top official said Monday, to help reduce costs for gems and jewelry exporters who rely on the metal as a raw material for their products.
The Trade Ministry has asked the Finance Ministry, which will decide on the proposal, to reduce the tax to 2% from 10%, the official told The Wall Street Journal. The Finance Ministry’s decision will become clear in the federal budget to be presented in Parliament on Feb. 28.
Gems and jewelry accounted for about 13% of India’s exports in the fiscal year ended last March. The sector has been hurt by a sharp increase in the tax over the past few years as the government clamped down on gold imports to control a growing current-account deficit and stabilize the rupee. The tax rate was at 2% in early 2012.
Raising the tax helped almost halve India’s gold imports to 287 billion rupees ($4.7 billion) last fiscal year, while the current-account gap declined to $45 billion from $88 billion the year before.
“We are hopeful the import duty will be cut as current-account deficit is fairly under control now,” the official said.
Lowering the tax would also check smuggling of gold and increase government revenue, said Harish Soni, chairman of the All India Gems and Jewelry Trade Federation.
Source:wsj.com
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