Gold prices plunge as customs duty cut in Budget 2021
- Currently, gold attracts 12.5% import duty
- The government cut basic customs duty on gold to 7.5%
Finance Minister Nirmala Sitharaman in Budget 2021 proposals said that the government will rationalise customs duty on gold and silver. Currently, gold attracts 12.5% import duty. The government announced cut in customs duty on gold and silver to 7.5% from 12.5%. Indian imports bulk of its gold and silver requirements.
Since the duty was raised from 10% in July 2019, prices of precious metals have risen sharply and to bring it closer to previous levels, we are rationalizing custom duty on gold and silver, the finance minister said.
However, an Agriculture Infrastructure and Development Cess (AIDC) has been proposed on import of specified goods. To ensure that imposition of cess does not lead to additional burden in most of these items on the consumer, the basic customs duty rates has been lowered, the government said. This cess shall be used to finance the improvement of agriculture infrastructure and other development expenditure.
On MCX, gold futures slumped 3% or about ₹1,500 per 10 gram to ₹47918. In comparison, gold prices were 1.2% higher in global markets at $1872.4 an ounce.
Bullion industry lauds the move of the government to cut customs duty on gold and silver, which was a long standing demand of the industry.
"Government has announced in the Budget 2021 to reduce import duty on precious metals to 7.5% from 12.5%, which would be favorable for the growth of Indian bullion industry. However, both will attract 2.5% of agriculture infrastructure and development cess. Being the world's second largest gold consumer, India imports bulk of its gold and silver requirements. Since the prices of precious metals have surged sharply in 2020, physical demand plummeted and imports have tumbled to multi-year lows. The total levy on gold currently is at 15.5%, including GST," said Sugandha Sachdeva , VP- Metals, Energy & Currency Research, Religare Broking.
"With reduced duty, cost will come down, which is a big positive in long term for the demand outlook of gold. It will provide a boost to the gems and jewellery sector, which plays a vital role in the Indian economy, leading to a thrust towards manufacturing and export and thus job creation. Also, it will curb illegal trade in gold, resulting in supplementing government’s revenue."
Though prices have witnessed a short term decline commensurate with the cut in duty, but the zone of Rs.47700-47200/10gms remains a crucial support area for gold prices at the domestic bourses and will eventually entice buying interest from long term investors, he added.
The jewellery industry has welcomed the government's move to cut import duty. "Reducing import duty on gold to 7.5% is a step in the right direction and in line with the long-standing demand of the gems and jewellery industry. Higher import duty was not only indirectly promoting illegal gold transactions but also eroding government’s revenue. The import duty reduction will make trade compliance. Moreover, the government should also focus on strengthening the e-governance system to beef up the tracking mechanism of illegal transactions of gold. All in all, a transparent trade always boosts consumer confidence," said Ahammed MP, Chairman, Malabar Gold & Diamonds.
So silver and gold (including imports by eligible passengers) will attract basic customs duty of 7.5% and AIDC of 2.5%.
Silver futures on MCX were off day's high but were trading 5.5% higher at ₹73,508 per kg tracking a 10% jump in global markets amid a GameStop-style squeeze.
Catch all the Budget News , Business News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
First Published:1 Feb 2021, 05:20 PM IST
- Top Gainers
- Top Losers
- 52 Week High