India, the world’s biggest bullion buyer, increased the tax on gold imports for the second time this year after record purchases widened the current-account deficit. Gold for immediately delivery fell.
The government will tax gold bars and coins and platinum at 4 percent, Finance Minister Pranab Mukherjee said in his budget speech for the year starting April 1. That’s up from 2 percent set in January. There was no change in the tax on silver.
“One of the primary drivers of the current-account deficit has been the growth of almost 50 percent in imports of gold and other precious metals in the first three quarters of this year,” said Mukherjee. “I have been advised to strengthen the steps already taken to check this trend.”
India doubled the tax on gold and silver on Jan. 17 by imposing a levy on imports as a percentage of the price, compared with the previous system of tax by weight. Global bullion prices rallied for an 11th year in 2011 as purchases by India peaked at 969 metric tons. Futures in India gained 32 percent last year, exceeding the 10 percent advance in global prices, as the currency slumped to a record low.
“The increase in duty will only make gold expensive for the consumers,” said Rajesh Mehta, chairman of Rajesh Exports Ltd. (RJEX), a Bangalore-based gold jewelry-exporter and retailer. “It will encourage smuggling.”
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