Customs duty cut on gold, silver to boost domestic jewellery demand

India's domestic gold consumption and manufacturing will get a boost with the reduction in customs duty on gold, silver and other precious metals.

"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% and that on platinum to 6.4%," Finance Minister Nirmala Sitharaman says in her budget speech.

The budget reduced customs duty on gold bars from 15% to 6%, gold dore from 14.35% to 5.35%, Silver bars from 15% to 6%, and silver dore from 14.35% to 6%. Customs duty on Platinum, Palladium, Osmium, Ruthenium and Iridium was also reduced from 15.4% to 6.4%. If coins of these precious metals attracted 15% duty earlier, now it has reduced to 6%. A similar customs duty reduction has been effected in gold/silver findings. The customs duty on Platinum and Palladium used in manufacturing noble metal solutions, noble metal compounds and catalytic convertors and bushings made of platinum and rhodium alloy when imported in exchange for worn out or damaged bushings exported out of India has also been reduced from 7.5% to 5%.

In 2022-23, about 4,000 kilograms of smuggled gold were seized in the first 11 months, equal to the combined seizures of the previous two years.

"The reduction in basic customs duty on gold from 10% to 5% and Agriculture Infrastructure & Development Cess (AIDC) from 5% to 1% will boost the overall competitiveness of the domestic jewellery industry. It will effectively reduce the overall taxes on gold from around 18.5% (including GST) to 9%," says Sachin Jain, Regional CEO, India, World Gold Council. He says the move will reduce the incentives for smuggling of gold and will create a level playing field for honest industry stakeholders. Gold prices will also correct locally, thereby giving a boost to retail gold demand.

"This was one of the long-standing demands of the industry and coming up of this announcement, especially at a time when the industry is already grappling with various challenges will certainly help the industry to march on the path to progress," says Colin Shah, founder and managing director of Kama Jewelry. He says this will play a major role in bringing down the cases of smuggling and provide cost benefits to the consumers in the country, which will provide a major fillip to the demand in the domestic market. Further, it will also provide a big boost to FTAs, thereby creating a space for expanding exports in the less explored overseas markets.