Chennai, July 1: The increase in customs duty on gold will not have any major impact on the precious metal's demand or the price, said a top official of Madras Jewelers and Diamond Merchants Association.

The duty hike will also not result in any increased smuggling activity of the yellow metal, he added.

On Thursday, the Central government increased the customs duty on gold from 10.75 per cent to 15 per cent to curb gold imports, noting that there has been a sudden surge of gold imports. Mohammed Zubair Case: ED To Scan Accounts of Alt News Co-Founder

In May, a total of 107 ton of gold was imported and the import volume last month was also significant, it said.

"The surge in gold imports is putting pressure on current account deficit. To curb import of gold, customs duty has been increased from present 10.75 per cent to 15 per cent," the Centre said.

Talking to IANS Jayantilal Challani, President, Madras Jewelers and Diamond Merchants Association and a partner in Challani Jewelry Mart, said the duty hike will not have any major impact on the demand or the price as the government has scrapped the surcharge.

He said the duty hike may not also result in any increased smuggling activity as it will go on whether the duty is low or high.

India is the second largest importer of gold.

On the other hand, Somasundaram PR, Regional CEO, India, World Gold Council, said: "India's gold demand is largely met through imports, which, at times when INR (Indian Rupee) faces some weakness, exacerbates the issue."

He said the Indian rupee exchange rate touched a record low earlier this week amid higher inflation and expanding trade imbalances.

Somasundaram said the hike in import duty aims to reduce gold imports and ease macro-economic pressure on the rupee.

"However, overall taxes on gold now rise sharply from 14 per cent to around 18.45 per cent and unless this is tactical and temporary, this will likely strengthen the grey market, with long term adverse consequences for the gold market," he said.

(The above story first appeared on LatestLY on Jul 01, 2022 06:09 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).