India Raises Import Duty on Raw Gold to 5 percent

January 22, 2013 at 09:42

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India more than doubled the import duty on gold dore bars and ores on Tuesday, hard on the heels of a hike in taxes on refined gold, as the government tries to curb demand in the world’s biggest importer of bullion and rein in a record current account deficit.

India, whose gold imports total about 800 tonnes a year, hiked the import duty on gold dore bars to 5 percent from 2 percent. Dore, an alloy of gold and silver that is used by refineries to produce pure gold, accounts for about 100 tonnes of annual imports.

The move came one day after the government increased import tax on gold to 6 percent from 4 percent, aiming at closing the gap on import duties on bullion bars and dore, which had become an attractive import since last year after the government hiked tax on gold imports to 4 percent.

“It was a duty arbitrage that they have plugged,” said Shekhar Bhandari, executive vice president of treasury at Kotak Mahindra Bank. “Otherwise people would not import through normal channels but import dore bars.”