Current Indian tax system on gold to create larger arbitrage opportunities

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Current Indian tax system on gold to create larger arbitrage opportunities

Chairman of All India Gems and Jewelry Domestic Council, Ananthan Padmanabhan informed that the tax rise may depress buyers and slim demand in the physical market by 10% this year, from 760 tons in 2018.

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The import duty increased for the 1st time since 2013 to 12.5 % from 10 %. According to Padmanabhan, “This is going to encourage a lot of smuggling.”

Padmanabhan said that, “This is very unsatisfactory, & we were expecting a decrease in customs duty and this came as a surprise and a shock.”

The current gap between Indian and international gold prices will expand by 2.5 % to 15.5 %. The high duties have encouraged a sequence of smuggling, including attempts to bring in bullion via planes and trains. Domestic rates have traced a flow in foreign spot gold and further rises would result in risky demand during festival and peak wedding season running from the month of August to December.

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