The Indian government today announced a 33% increase on gold import tariffs, from 6% to 8%. This follows on the heels of import restrictions on gold except for use in the jewelry industry, in response to $15 billion USD of gold being imported by India just in the last two months.
The new 8% import tax is the second increase since the first of the year, and representing a quadrupling of import taxes in two years. These actions are in response to world-leading imports of gold by Indian citizens, which has swollen the nation’s current account deficit to a crippling 6.7% as of the quarter ending in December 2012. The Royal Bank of India, the nation’s central bank, has a target of only 2.5% for the CAD.
India just banned the import of gold bars on commission, requiring all imports be on a 1005 cash basis, AND only for use in the jewelry industry. Other measures being pondered by government officials include a ban on the sale of gold coins by banks.
The tax hike announced today and last week’s new restrictions are widely believed will exacerbate an already rampant problem with gold smuggling from the Middle East and Southeast Asia.