Govt reduces gold duty drawback rate by more than half after revising import duty in Budget 2024: Report

The government has cut the gold duty drawback rate on August 23, almost a month after revising import duty.

According to the new notification, for gold jewellery, the duty drawback rate has been reduced from ₹704.1 per gram of net gold content (with a purity of .995 or more) to ₹335.50 per gram, a report by CNBC TV18 said.

The rate for silver jewellery and other silver items has been cut from ₹8,949 per kilogram (.999 purity) to ₹4,468.10 per kilogram, ensuring consistent rates across silver products, the report said.

The duty drawback rates is an amount aimed to reimburse exporters for the customs duties paid for imported inputs. It is intended to ensure that goods meant for exports are not impacted by domestic taxes. These rates are adjusted according to import duties on gold and silver as mentioned in the budget.

Budget 2024 announcement on gold duty

Finance Minister Nirmala Sitharaman in Budget 2024 on July 23, proposed to cut custom duty on gold and silver to 6%. She further cut down custom duty on platinum to 6.4%.

“To enhance domestic value addition in gold and precious metal jewellery in the country, I propose to reduce customs duties on gold and silver to 6 per cent and that on platinum to 6.4 per cent,” Finance Minister said during the announcement of the Union Budget 2024.

However, during the Budget 2024 presentation, no changes were introduced to the gold duty drawback rate which may have resulted in gold and silver importers to get in the raw materials at a lower price and eventually get a higher drawback duty on exports. The revised duty drawback will fix this issue, the CNBC TV18 report said.

Finance Minister's proposal for a sharp reduction in import duties on gold and silver will keep a check gold smuggling and free up blocked funds, Mint reported on July 28, quoting Central Board of Indirect Taxes and Customs (CBIC) chairperson Sanjay Agarwal. The report also said that as gold is the primary raw material for gems and jewellery, a reduction in import duty may release blocked funds for such business.

Gold imports rose to $48.8 billion in FY 2024 from $33.6 billion in FY 2019, an increase of 45.2%. India's gold exports have also rose from $6.59 billion in FY 2021 to $10.99 billion in FY 2022, $12.29 billion in FY 2023, and $13.24 billion in FY 2024, as Mint previously reported.