Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

ROLE OF INDIAN GOVERNMENT
In summary, when Customs duty has been around US$ 25 per oz, unofficial imports have tended to surge. At the US$ 16
per oz level, the incentive to import gold unofficially has been undermined.
State sales tax
Most State sales taxes are now 1%. In recent years, however, some States have sometimes reduced the sales tax on gold
bullion to levels below 1% in order to attract more gold imports. For this reason, Ahmedabad (Gujarat) and Jaipur
(Rajasthan) have acted as important regional and national distribution centres for gold bullion. In 2002, Maharashtra
(Mumbai) and Haryana (Gurgaon) have also reduced their State sales taxes on bullion to less than 1%.
In Ahmedabad, the current level is 0.5%. In Jaipur, dealers authorised between 14 January and 30 September 2001, were
allowed to pay a lump sum of Rs 1 crore (around US$ 200,000) and Rs 10 lakhs (around US$ 20,000) per annum in order
to sell an unlimited quantity of gold without paying any additional State sales taxes. The scheme has been extended until
March 2003.
The Government has expressed an intention to standardise sales taxes across India through the introduction of a standard
minimum Value-Added Tax (VAT). The current target date is April 2003.
Municipal taxes
Some cities also apply local taxes in addition to the State sales tax. For example, Mumbai currently levies on gold bullion a
small octroi (entrance into the city) tax.
GOLD JEWELLERY
State sales taxes
The State sales tax varies by State, and is subject to change. It normally ranges between 1% and 4%.
Sales taxes on studded jewellery in some States can be higher.
Municipal taxes
As in the case of gold bullion, gold jewellery can also be subject to one or more local taxes.
INDICATIVE COST OF GOLD IMPORTS 1990 - 2001
Year Imports for Mumbai gold Approx. Cost in real terms at 1990 prices
domestic use prices * value
Tonnes Rupees Billion Rs Billion Rs % +/- Index
per 10 g 1990 = 100
1990 176 3,399 59.822 59.822 - 100
1991 155 4,044 62.682 55.080 - 8 92
1992 262 4,255 111.481 87.642 + 59 147
1993 239 4,384 104.778 77.499 - 12 130
1994 296 4,652 137.699 92.415 + 19 154
1995 384 4,798 184.243 112.070 + 21 187
1996 408 5,191 211.793 118.188 + 5 198
1997 642 4,556 292.495 152.421 + 29 255
1998 688 4,182 287.722 132.469 - 13 221
1999 651 4,333 282.078 124.045 - 6 207
2000 673 4,520 304.196 128.461 + 4 215
2001 672 4,462 299.846 122.136 - 5 204
Source: Imports for domestic use: see section on “Gold Supply and Demand”; includes official and unofficial imports. * Mumbai gold prices include
import duty and local taxes.
The cost of annual gold imports for domestic use increased in real terms by 204% between 1990 and 2001.
After a decline of 13% in 1998, the cost in real terms has remained largely static.
Its actual cost in 2001 (672 tonnes) was approximately Rs 299 billion (US$ 6.2 billion).
In 1990 (176 tonnes), the actual cost was Rs 60 billion (US$ 3.5 billion).
AN INTRODUCTION TO THE INDIAN GOLD MARKET 31