Finance ministry mulls 2% cut in gold import duty

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Wednesday, January 29, 2014: After twelve subsidised LPG cylinders, some cheer may come on the gold front soon. The finance ministry – which lacks fiscal ammo for big-bang pre-electoral giveaways – may still grant some reprieve to the country's middle-class. 

The ministry is planning a two per cent cut in gold import duty and review of duty hike last year on imported high end TVs.

A senior finance ministry official told dna, "The ministry is looking at a 2% cut in the gold import duty. A decision is likely to be taken within a month." With this, 8% duty will be imposed post the notification, down from the current 10%. As per an estimate, the price of the yellow metal will come down in the range of Rs 600 – Rs 800 per gram with the reduction.

In an another reprieve to the country's middle class, the finance ministry is also reviewing the ban on duty free imports of flat screen TVs by air travellers imposed in August last year at the height of the Rupee crisis. Import of LCD/LED/Plasma TV as part of free baggage allowance was banned beginning August 26 last year. Gold import duties were also jacked up at that time. The idea was to dis incentivise the 'luxury and unessential items'.

An import duty of 36.05% was imposed on these high end TVs. The official said, "It cannot be said at this point whether import duty on such products will be relaxed or simply be waived off. But it is being reviewed and a decision will be taken soon."

Experts, meanwhile, believe that the step is going to be a more political decision than economic decision. "The government and the Reserve Bank of India (RBI) seem to be comfortable on the current account deficit (CAD) front and that is why there could be a space for gold import duty cut. But we are still having a CAD, so this will be more a political decision than economic decision," said Abhishek Goenka, CEO, India Forex Advisors.

Interestingly, recently two key economy moves by the government have been prompted by the UPA's political masters. UPA chairperson Sonia Gandhi asked the government to 'review restrictions on gold' two days back. A week earlier Congress General Secretary Rahul Gandhi requested PM Manmohan Singh to take action on the LPG cylinder front. The petroleum ministry is likely to soon move a Cabinet note for increasing the cap on subsidised LPG cylinder from 9 to 12.

Meanwhile, the RBI on Tuesday said CAD in the current financial year is expected to remain below 2.5 per cent of GDP compared with 4.8 per cent a year ago.

Courtesy: DNA India