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Union Budget 2023: As Gold Prices Hit Record, Industry Hopes For Duty Cut

By Colin Shah
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The government hiked the import duty on gold to 15% in July 2022. The impact of the move is evident from the data in the table below (Illustrations 1 & 2), the imports have fallen in a big way. The total imports of gold in the year 2021 were over 1,000 kg, this was a year that witnessed lockdown, and business disruptions in the second quarter (April-June) thereby netting import duty of nearly $6 billion for the government, an average of $500 million per month. The calendar year 2022 saw a dip in terms of imports- this was largely due to the rising gold prices coupled with a hike in import duty. This led to imports of gold in CY22 only to about 700 kg, import duty collection of about $4.4 billion, and a monthly average of $360 million.

 
Union Budget 2023: As Gold Prices Hit Record, Industry Hopes For Duty Cut
2021Average Gold Rate (INR)Duty RateQuantity (Kgs)Quantity (gms)Duty Collected (INR)Gold Imported (USD mn)Duty Collected (USD mn)
Jan4295.8812.570.387038037793004.34027.47503.43
Feb4213.9912.597.489748051347468.155284.56660.57
Mar3910.6712.5176.7617676086406327.38483.831060.48
April4139.3610117.0411704048447040.186218.37621.84
May4368.891012.52125205469844.02652.4865.25
June4232.771016.49164906979833.608905.7590.58
July4330.631076.447644033103297.54127.64412.76
Aug4155.810119.5311953049674277.46633.17663.32
Sept4123.631096.419641039755868.634997.68499.77
Oct4278.651099.129912042410003.585029.4502.94
Nov4322.061081.48140035181548.054174.59417.46
Dec4277.631094.539453040436436.394695.58469.56
Total 1058.11058100477004949.155230.525967.95
2022Average Gold Rate (INR)Duty RateQuantity (Kgs)Quantity (gms)Duty Collected (INR)Gold Imported (USD mn)Duty Collected (USD mn)
Jan4277.631044.64462019086762.82348.1234.81
Feb4481.731091.59154041025710.74772.4477.24
March4781.811018.81884090089301000.6100.06
April4663.091028.528470132758031675.3167.53
May4525.8310110.5110460499922636013.8601.38
June4505.961052.45242023620255.42724.2272.42
July4457.431544.74468029873695.92320.9348.14
August4468.61567.46739045170868.43549.7532.46
Sept4257.671580.78072051551868.43790.8568.61
Oct4343.65157676000495176103661.6549.25
Nov4513.891566.56654045053102.83209.1481.36
Dec4725.2915 0 0
Total 681.68681680377176870.235066.394333.25

Data for the month of December 2022 is yet to be updated

 

A hike in the import duty in the past has affected domestic consumption of gold as well for re-exports of gold and gold jewelry, thereby affecting the earnings of the industry. Measures should be taken to boost exports.

Total imports in 2022 have fallen over 30% YoY. Also, the gold prices in the month of July 2022 at the time of the hike in import duty was around Rs 46,000/10 gm it has risen to over Rs 57000/10 gm. This shows that the move of hiking import duty does not help keep prices in check. There are far more and better ways to support the currency. The INR has strengthened largely due to the US dollar index softening. This is likely to continue in the near future providing natural strength to the INR. The move by the government did not yield the desired results and had an adverse impact on the growth of the industry. The currency and the deficit have stabilized now, making room for the government to reverse its decision or provide partial relief on the import duty front.

About the author: Colin Shah, the author is the Managing Director of Kama Jewelry

Story first published: Saturday, January 28, 2023, 10:14 [IST]
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