KOLKATA/MUMBAI: If gold future contracts were an accurate pointer to what North Block might do with levies on the yellow metal, the odds in favour of a cut in import taxes should shorten.
Why so? October futures on Indias traditional store of value are now at a 2.5% discount to current spot import prices, with the new administration due to unveil the Budget on July 5.
The discount reflects expectations from the upcoming budget, said Abhishek Bansal, chairman and managing director of Mumbai-based Abans Group.
“Gold futures have rallied nearly 6% over the past month on account of a dovish tilt in global monetary policy and geopolitical risks,”he said.
Gold October futures closed at Rs 33,024 per 10 gm on MCX on Tuesday, while the imported gold was available at Rs 33,820 per 10 gm indicating a 2.5% discount prevailing on gold for October futures. The rally in gold prices in last one month on the MCX has resulted in turnover for gold going up by 61.8% to Rs 7108 crore from Rs 4393 crore on May 20.
Global gold futures rallied after a dovish comment from ECB president Mario Draghi and optimism over a Federal Reserve rate cut in its July meeting. But gains retreated later on expectations that the trade impasse involving the worlds two biggest economies would be resolved.
At present, gold attracts import duty of 10%. The GST on gold is 3%. So, the total tax incidence on gold is 13%. The industry has been seeking a duty cut for quite some time now, although New Delhi has remained steadfast on its decision to impose a 10% total levy on gold.
“For the past five years, we have been seeking an import duty cut. But nothing has happened. This time too we are keeping our fingers crossed. The duty should at least come down by 4%,” said Anantha Padmanabhan, chairman, All India Gem & Jewellery Domestic Council.
Gold prices in India are currently getting support from strong global prices and depreciation in the rupee, despite weak domestic dRead More – Source