On July 23, Finance Minister Nirmala Sitharaman declared that customs duties on gold and silver would be reduced to 6%. The finance minister also disclosed the reduction in platinum customs duties 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,” the Finance Minister said during the announcement of the Union Budget 2024.
Analysts predict this action will increase demand for precious metals in the nation and cause a drop in domestic gold and silver prices.
“Customs duty on gold and silver has been reduced to 6% which may lead to a decline in domestic prices and perhaps lift demand. The existing duty on gold and silver is 15 per cent which comprises 10% of basic customs duty and 5 per cent as Agricultural Infrastructure Development cess,” said Hareesh V, Head of Commodities, Geojit Financial Services.
India’s growing gold demand may support world gold prices, which hit a record high earlier this year. But this would also increase India’s trade imbalance and put more strain on the weak currency.
The gem and jewellery sector has long demanded a reduction in the basic customs duty on gold, silver, and platinum.
“In the Budget, the Finance Minister announced a reduction in Basic Customs Duty on gold and silver from 10 per cent to 6 per cent. Adding 5 per cent AIDC, which remains unchanged, the total import duty on gold and silver is reduced from 15 per cent to 11 per cent now. As a result, the price of gold reacted lower in MCX by more than ₹2000 to ₹70,350, and silver by ₹2500 to ₹86,600 as the market prices in the lower import duty gap of 4%. The broad view remains volatile and weak as Comex gold stays below $2415,” Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities said.
Sitharaman further announced a reduce the cost of production of steel and copper. “I propose to remove the BCD on ferro nickel and blister copper. I am also continuing with nil BCD on ferrous scrap and nickel cathode and concessional BCD of 2.5 per cent on copper scrap,” she added.
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Surge In Gold Stocks
After Finance Minister Nirmala Sitharaman announced a cut in customs duties on precious metals, shares of companies that sell gold and jewellery shot up on Tuesday.
Senco Gold’s shares shot up 6.16 per cent to ₹1,000.80 on the BSE. PC Jeweller increased by 5% to ₹74.16, hitting its upper circuit limit, while Rajesh Exports experienced a 5.49 per cent boost to ₹313.90.
Furthermore, shares of Titan Company increased by 3.66 per cent to ₹3,371.65 per share. On the exchange, Kalyan Jewellers India gained 1.54% to reach ₹537.05 per share, while Tribhovandas Bhimji Zaveri increased 2.79 per cent to ₹140.20.