India Raises Gold-Import Tax for Second Time; Prices Drop

pmbug

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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 fell.

The government will tax gold bars and coins and platinum at 4 percent, Pranab Mukherjee, finance minister, said in his budget speech for the year starting April 1. That’s up from 2 percent set in January. There was no change on the silver tax.

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 Indian market will wait for lower prices and there is also the risk that this duty hike will lead to increased smuggling,” Edel Tully, an analyst at UBS AG in London, said by e-mail today, in response to questions from Bloomberg News. “Today’s duty increase will dampen Indian demand.”
...

http://www.bloomberg.com/news/2012-...mport-tax-for-second-time-prices-drop-1-.html

Gov trying to slow peeps roll... :gold:
 

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Silver, the poor man's gold, has turned out to be the winner in India's budgetary excise duty cuts by escaping the attention of the Finance Minister. Investors in India are keen to push silver above the recent channel high with traders insisting that it will be more than speculation that will drive demand for the white metal.

"Silver has clearly been exempted for a reason,'' said Prithviraj Kothari, president of the Bombay Bullion Association. ``Out of $50 billion worth of imports of precious metals into India, silver imports were just $4 billion, while that for gold was the other $46 billion,'' he said.

On Friday, India's Finance Minister exempted branded silver jewellery from excise duty. Silver coins of purity 99.9% and above were also exempted from excise duty. However, the excise duty on refined gold was doubled from 1.5% to 3%.

Kothari was of the opinion that silver coins and silver bars, called `chausar' in the local lingo and among bullion traders across the country, would soon sell like hot cakes. "There is not much demand for silver jewellery among Indian investors. Most go for high value silver coins or for a 1 kilo silver bar. The latter is expected to fly off the shelves now and investor interest would surely be pushed higher as a consequence of the double whammy on gold in the budget,'' he added.
...

More: http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=147564&sn=Detail&pid=102055
 

RealFinney

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I wonder if this is a case, not of attempting to manipulate the gold price, but of simply attempting to raise tax revenues in a country ranked 95th in world for corruption.

And hey, if India imports less, thats more for the rest of us :)
 

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I wonder if this is a case, not of attempting to manipulate the gold price, but of simply attempting to raise tax revenues in a country ranked 95th in world for corruption.

And hey, if India imports less, thats more for the rest of us :)

It seems to be a consensus that India and China will be the main areas a gold bubble will take hold. It's in our best interest that their demand doesn't get squashed.
 

swissaustrian

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If (physical) demand from India were to be slowing down due to this move, it would be BIG news.
The Ruppie recently gained some strength, giving the Indians additional purchasing power for gold. Now the gov is intervening.
 

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I doubt their strikes are going to bend the government's position, but bravo to the people for trying. It's only going to serve to highlight the whole issue of gold in the end.
 

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With the Indian government stating that it would delay the implementation of hiking the excise duty on non-branded gold jewellery, the bullion strike in India has been officially called off. Jewellers in Mumbai and several parts of the country were back to their stores Monday afternoon, expecting a revival in demand.

The strike by jewellers and retailers began on March 17, immediately after the Union Budget, to protest the government's decision to impose excise duty on non-branded jewellery and doubling of the import duty on gold to 4%. Market estimates have placed the loss at a staggering $2.1 billion.

Bachhraj Bamalwa, chairman of the All India Gems and Jewellery Trade Federation which had given the call to strike, said the government had assured that no jeweller would be forced to register to pay excise duty, and that no coercive action would be taken.

Though some retailers and traders staged a protest in New Delhi on Monday morning, traders in Mumbai and other parts of the country opened their stores late afternoon as the news spread.

NO ROLLBACK

Slowly but surely, the Indian government has begun to bow to the demands of the bullion traders. ...

More: http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=148653&sn=Detail&pid=102055
 

australiaincometax

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Today's international gold market rate is increasing day by day. It's becoming quite impossible to by gold for middle class people.
 

ancona

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Today's international gold market rate is increasing day by day. It's becoming quite impossible to by gold for middle class people.

My percentage of gold to silver is nearly microscopic. In my opinion, when TSHTF, no one will be able to "make change" for an ounce of gold, because it's value in goods and services will be so incredibly high. No, I cannot afford to stack gold either. If I did, I would be able to fit my entire stack in the pockets of my cargo pants. I like having a nice tall stack of silver, it feels all existential.
 
K

kjansen1969

When money is to be made usually there is a way it would be paid if the gold is wanted desperately enough. It's a shame all the rising costs have to take place, of course but what's done is done
 

ancona

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When the fed finally raises interest rates, which it may be forced to do by the market at some point, gold and silver will begin an exponential rise. Better get on board now. Gold will become so dear that buying an ounce a year may become nearly impossible.
 

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I'm a silver guy... so I read this additional tax in India as a plus. There are a lot of people there, and a lot of people who invest in PMs there as savings. If they don't buy gold, but increase the demand for silver, the value of my stack goes up.

I like that.

(Or, am I reading it wrong?)

ADK
 

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Gold priced in Nepalese rupees hit a new record high per troy ounce earlier this month, at 56,000 Nepalese rupees per tola. After neighbouring India recently announced a rise in its gold import taxes from 2 to 4%, the Nepalese government had no choice but to raise its own gold import taxes in response, in order to avoid smuggling activities at its borders. ... Sales of gold jewellery dropped in response. However, continuing weakness in the Indian and Nepalese rupees is helping to sustain high (local) prices for precious metals. The short-term outlook for the Indian economy is gloomy, as traders continue to desert emerging market assets in the face of growing deflation fears.

Last week the Indian government met gold and jewellery traders' demands by reconsidering its plans to impose a new purchase tax on this sector. The Indian Ministry of Finance intended to impose a tax on registered as well as unregistered trademark products, but decided to drop this idea in the face of traders' vehement protests.

However, increased import duties on gold and silver will remain. ...

http://www.goldmoney.com/gold-research/roman-baudzus/nepalese-currency-under-pressure.html
 

bushi

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When the fed finally raises interest rates, which it may be forced to do by the market at some point, gold and silver will begin an exponential rise. Better get on board now. Gold will become so dear that buying an ounce a year may become nearly impossible.

Hi Ancona,

Could you elaborate a little bit on that above statement? My thinking is, that PMs are/ought to be seen as "safe havens", and alternative to cash accounts - in times, when cash is depreciating AND/OR untrusted. My thinking is, that high interest rates would LOWER the demand for PMs, because people would be able to just keep their spare paper in the bank, and get decent returns on it -> thus lower demand = lower prices of PMs, in high interest rates environment would be my guess?

regards,
 

DSAbug

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We are in a different phase of the crisis. We are still seeing deleveraging. unless your job is related to the trading of precious metals, just ignore the price and scale in. I don't think the "loss of confidence" in the currency will happen for at least a few more years now.
 

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Indian rupee falls on sustained oil demand; govt raises gold import duty

MUMBAI, Jan 21 (Reuters) - The Indian rupee fell on Monday, retreating from a two-and-a-half-month high hit earlier in the session and snapping two sessions of gains, due to sustained dollar demand from oil refiners.

The dollar demand from oil refiners looking to meet payment obligations offset purchases of the local currency by foreign funds in a session with thin trading volumes because of a U.S. public holiday.

However, the rupee recovered some losses in late trade after a finance ministry official said that import duty on gold and platinum has been raised to 6 percent from 4 percent.


Gold imports constitute a key demand for dollars in the domestic currency market after oil.

A global risk-on environment, expectations of interest rate cuts from Reserve Bank of India and the government's recent fiscal consolidation steps have spurred gains in domestic shares that have attracted foreign flows.

Inflows into Indian stocks are already at $2.45 billion so far in 2013, coming on the back of sustained capital flows of over $24 billion in the previous year.

However, the country's fiscal and current account deficits will likely continue to be a drag on the currency.

"The fundamental position on the current account deficit will not come down. Oil and gold importer-related demand will keep the dollar bid with the rupee to weaken to 54.80 levels in the run-up to the budget," said Param Sarma, chief executive at NSP Forex.

The partially convertible rupee closed at 53.765/775 per dollar, weaker than its 53.71/72 close on Friday. It rose to 53.63 in session, its highest level since Nov. 2.

Analysts, however, expect the rupee to be supported this week, with shares buoyant because of improving corporate earnings, while the government's measure to allow fuel retailers to increase diesel prices gradually has also shored up confidence in domestic markets.

Moody's, in a report dated Jan. 17, reiterated its "stable" outlook on India's ratings, citing the country's potential economic growth, robust domestic savings rate and a dynamic private sector.

The affirmation assuages some concerns at a time when both the other two global rating agencies--Standard & Poor's and Fitch--have a negative watch on the country's rating due to India's fiscal and current account deficits among other factors.

In the offshore non-deliverable forwards, the one-month contract was at 54.05, while the three-month was at 54.59.

In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 53.9725 with a total traded volume of $5.7 billion. (Editing by Gopakumar Warrier)
http://in.reuters.com/article/2013/01/21/markets-india-forex-idINL4N0AQ3P320130121
 

bushi

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one thing that cheers me up:

Philosophically, whenever one tries to achieve his goals, by the use of force/violence, his efforts are bringing exactly the opposite results. That is the LAW, not some New Age dreamy-eyes thing, someone could draw the connections to the 2nd law of thermodynamics even (ie. things are naturally trying to get back to the mean, via the path of the least resistance). Therefore, since governments are in essence a state's monopoly on force/violence, all they try to do, turns into shit - when they do not really have their people's backing on the issue. Examples are plenty. So I could really stop right here :).

OK, high tone off. Why I think it doesn't matter that much, what % of the import duty is imposed on retail market in India (ie little man on the street there), for the grander scheme of things: Indians are still, relatively speaking, dirt poor. While there is a lot of them, I am not sure if it matters that much, when price of PMs (and gold specifically), goes really high (I mean, couple of times higher from today's) - IDK if gold will be still affordable for majority of them? I don't think so (on the side note, that is why I think that eventually, public buying pressure will be on Silver more rather than Gold).

But it will be still affordable for investing community. I believe, that the ongoing crises (that we will have plenty of, one after another, and there's no doubt about that), will bring more & more conservative approach to portfolio management, more & more people will add 2 + 2 themselves, and realize that the "official story" does not really make 4. Therefore, ultimately safe investments will play bigger & bigger role in their portfolios.

Now, according to what I know, average gold position (it includes all gold, paper as well) in the global, average portfolio, is slightly below 1%. Read that again: less than 1% of global financial assets are invested in Gold (ah, "Gold is a bubble waiting to burst" my arse!)

If/when perception shifts, and this global average portfolio starts getting rearranged, say, some more conservative investors will want 10% of their portfolio exposed to gold. Lets assume, that the global average portfolio will jump ONLY to a tiny 3%, on average. That is three times demand, over practically flat supply. If we take into account Chinese frantic hoarding, the supply is probably getting tighter, for everyone else. And this is purely investment demand, maybe not so much speculation driven, but fear-driven. I think that price of gold will meet that up-going demand somewhere in the middle (rising prices of gold, would mean only smaller amount of OZs would be required, to cover higher % of the portfolio, therefore I don't think that the price will reflect demand increase 1:1, but rather less than that. Which still is plenty - remember, here's considered that average portfolio will increase Gold exposure from almost non-existing sub-1%, to a still minuscule 3% - but what if by some freak accident, it jumps to 10% :)).

Price would not matter that much for these guys, as the peace of mind/perceived security of their holdings.

It is just a matter of time, not IF, but WHEN.

In the meantime, they can tax Indians as much as they want. What happens when they do that? Perceived scarcity of Gold in India, even increases = perceived VALUE to the folks increases as well. That encourages imports, despite higher prices on the street - as long as someone can still afford it. They all know that they are racing against the government, with their depreciating Rupias, and ever-increasing import duties. The gov't was rather clear with that message.

Next thing, how many of India's newly formed and rapidly growing middle class, is sophisticated enough, and has access to places like BullionVault, etc.? Will they be willing to invest in foreign holdings of physical gold/silver, instead of home country, to sidestep the import duties? I don't know, I know I surely would, if that means I could get a nice 6% discount over my street price (and likely to grow further).

My (usually long) $.02
 
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Unbeatable

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I'd guess the reason they upped it to 6% is because the 4% did very little.

When you think of the housing boom we had in the West when you saw your neighbors tripling their money buying a house. Everyone started taking an interest in property and everyone wanted in, nobody wanted to miss out. Well they've had the same thing in India except with gold. They've always loved it and it's a huge part of their culture but the fact that they've seen its' price quadrupling in the last 12 years, well you can't put the brakes on that with a 6% tax. The only thing you really risk doing is pissing your voters off.


Also in India the Post Office sells gold and in tiny denominations, 0.5 grams, 1 gram and so on. So even some of the poorest families can afford it.
The premiums though are very high the smaller the weight you buy so IMO all the current tax will do is make them have less frequent purchases but of larger weights. (For example the post office currently offers a 5.5% discount if you buy more than 5 grams so right there you can offset the tax by waiting to buy 5 grams rather than 2/3 smaller purchases or you can just buy 5 grams with a few friends at the same time and then split it up.)

http://www.bbc.co.uk/news/business-21129436

Last year's rise in import duty only had a temporary impact on demand, and some analysts said the latest move would have little effect.

"The government's revenue will increase, but imports won't diminish," said Mohit Kamboj, president of the Bombay Bullion Association.
 
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bushi

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"The government's revenue will increase, but imports won't diminish," said Mohit Kamboj, president of the Bombay Bullion Association.

ABOUT a quarter of the gold flowing into India is coming through irregular channels given the "anti-gold" stance adopted by the government of one of the world’s leading gold markets, Thomson Reuters GFMS metal analytics global head Philip Klapwijk said on Monday.

:rotflmbo: ...the politicians slash bureaucrats are soooo fecking stupid, they will NEVER learn - although, it happens ALL THE TIME - they see some fat juicy goose walking around, that they have never raised themselves, but ready to be slaughtered for their own benefits - they ramp up the taxes - and they end up with NOTHING, because the public have adjusted, as always. It is always, ALWAYS the same old shit - they rise taxes, and the revenue brought by the new taxes, actually DECREASES. They lower the taxes, and the revenue actually INCREASES, because people think it is a fair share to contribute, and stop avoiding/diverting the overly taxed activities.

I mean, that scenario has happen countless times, yet, the fecking idiot psychopaths, who call themselves our "leaders", they are still in it, determined to "do whatever it takes", to bring the fairness and prosperity to all, by taxing the shit out of them.
 

pmbug

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Looks like 6% isn't enough either:
The Reserve Bank of India could limit gold imports by banks in "extreme circumstances," the bank said on Wednesday as it put forward measures to help the world's biggest consumer of gold rein in purchases and battle a record-high current account deficit.

India, which imported about 750 tonnes of gold last year with 60 percent of that through banks, has already increased the import duty on gold, which now stands at 6 percent.

But a record high current account deficit of 5.4 percent of GDP in the September quarter has raised concern at the central bank, prompting it to link further monetary policy easing to a lower current account deficit (CAD).

"If the CAD remains sustainably high -- say, in 5.5-6 percent range, for the next three or four quarters, then it might be a case of an extreme situation," a senior official with direct knowledge of the matter told Reuters.

The RBI said it would also consider introducing gold-linked financial instruments to divert savings of inflation-wary Indians from gold bars and coins into bonds, it said in a report published on Wednesday.

The recommendations now go to government for review and after its feedback, the RBI should announce new restrictions and products to curb gold import demand in the next few months.
...

http://in.reuters.com/article/2013/02/06/gold-india-imports-idINDEE91505M20130206
 

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The only thing India is likely to accomplish with this diiotic import tax is to increase demand. people will see this as a harbinger of things to come, which usually means escalating taxes to stop the inflow of gold altogether and control the value of the rupee. It is destined to fail miserably.
 

pmbug

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* bump *

What goes up must come down?

...
"The Indian government is set to unveil its annual budget for the upcoming 2023-24 fiscal year (April-23-March-24) on 1st February," said Metals Focus in its report Monday. "Under normal circumstances, any changes in the customs or import duty also tend to be revealed at this time."

A lower import duty would lower the price of gold in India and increase demand, said government and industry officials. "The government is aware of problems created by the higher duty structure and they will be fixed soon," Reuters quoted one government official.
...

 
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I seem to remember reading about how important gold is to India's culture.


"Gold has a deep rooted significance in Indian history, alluring people from different parts of the world with its beauty and charm. Its golden glow was visible across seas and borders, evoking emotions from millions of hearts. Over the years India’s infatuation with gold has grown stronger and stronger, with Indians accounting for most of the gold consumed globally. Gold, in Indian history is more than an investment, it is a culturally significant metal which has found a place in Indian hearts and homes alike.

It is true that a vast majority of the Indian population survives on meagre resources, but despite this they find ways to buy gold and make it an integral part of their lives, irrespective of gold rates in their city/town. Gold has takers across the length and breadth of our nation, right from Delhi to Chennai and Ahmedabad to Kolkata. There are a few reasons which have propelled gold to a pedestal in India, a spot which it is likely to hold on to for a long time."

Full article. https://www.bankbazaar.com/gold-rate/significance-of-gold-in-indian-culture.html
 

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So a few days ago, Kitco et al were saying that India was going to lower it's gold import duty. Looks like they got it wrong...
The Union Budget 2023 presented by Finance Minister Nirmala Sitharaman has brought about significant changes to the import duties on various goods. While the import duty on diamond seeds has been reduced, the customs duty on gold, silver, and platinum has been hiked to 10 per cent. ...
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The increased customs duty on gold and platinum bars and articles made from them will lead to a rise in the prices of these precious metals. Similarly, the import duties on silver bars, strings, and other items have also been raised to match those of gold and platinum, thereby encouraging domestic production.
...


Precious metals will be more expensive in India so official imports will likely drop. Smuggling/black market sales will likely increase. Overall, I expect this will put pressure on gold/silver prices as import demand from India decreases.
 

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More details:
...
The basic customs duty on silver was raised to 10% from 7.5% ...
...
Local silver prices jumped by up to 2% after the duty changes.
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The jewellery industry was expecting a reduction on the import duty on gold as smugglers have been offering hefty discounts as illicit imports boom after COVID-19, denting the market share of banks and refiners. However, the government did not cut its import tax on gold.

 

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Physical gold demand in India ticked up this week, as jewellers resumed purchases after staying away for a couple of weeks hoping for an import duty cut in the government budget amid the wedding season.

"Jewellers were not buying for few weeks anticipating government will cut import duty in the budget. As there wasn't any change in the duty structure, they have started buying small quantity," said Harshad Ajmera, a gold wholesaler in Kolkata.

India did not slash import duty on gold in its annual budget presented on Feb. 1, but raised the import duty on silver.

Bullion industry was seeking a reduction in the duty as gold refiners have nearly stopped imports of gold dore, a semi-pure alloy, as grey market operators offer hefty discounts to market rates and cut into their slender margins.

But retail demand was still muted as consumers were struggling to digest record high prices, said a Mumbai-based dealer with a private bullion importing bank.
...


Physical demand for gold and silver (from India) might cool a bit as prices and import duties are at all time highs...
 
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