Nirmala Sitharaman Cuts Gold, Silver Import Duty, Comes To The Rescue Of Domestic Bullion Industry

Union Finance Minister Nirmala Sitharaman has come to the rescue of the bullion industry by proposing to lower customs duty on gold and silver and with a couple of other measures in the 2021-22 Budget.

The lowering of duty will help the bullion sector take on illegal trade that has been flourishing in view of gold being smuggled into the country. The higher duty on gold since 2019 had encourage smuggling of the precious metal.

The Finance Minister, presenting the Budget in Parliament, proposed a five percentage point cut in import duty on gold and silver.

“Gold and silver presently attract a basic customs duty of 12.5 percent. Since the duty was raised from 10 percent in July 2019, prices of precious metals have risen sharply. To bring it closer to previous levels, we are rationalizing custom duty on gold and silver,” Sithraman said, reading out her proposals in Parliament.

The Indian bullion industry and jewellers have been seeking a duty cut, particularly since it affected demand.

The higher duty also led to smuggling of gold from centres such as Dubai and Singapore with Customs officials arresting at least a couple of persons every day at various ports, particularly in southern India.

This impacted gold demand, too. According to the World Gold Council, a body of gold-producing nations, India’s import of the yellow metal last year dropped to 446.4 tonnes, the lowest since 1995.

The precious metals will, however, attract a 2.5 percent Agriculture Infrastructure and Development Cess (AIDC) taking the total value of duty to a little over 10 per cent.

Though the AIDC cess would push up prices, the reduction is considered substantial by the sector.

Bullion industry participants said the duty cut is a positive step and a "welcome surprise".

They also said that it will reduce illegal trade in gold done with smuggled gold as the duty cut will now be a major disincentive.

Fair businesses and organised trade are now expected to gain from this as till now, smuggled gold encouraged unorganised and fly-by-night operators.

The Finance Minister also proposed a cut in the Customs duty on raw materials of domestic refiners such as gold and silver dore bars, gold and silver findings, precious metals scrap and waste and spent catalyst or ash containing precious metals as part of correction of “inverted duty structure”.

Import duty on gold dore bars will be 6.9 percent from 11.85 percent now and for silver dore bars it will be 6.1 percent against 11 percent. Duty on findings has been halved to 10 percent.

Waste and scrap will attract 10 percent Customs duty against 12.5 percent, while catalyst’s duty will be 9.2 percent against 11.85 percent.

Duty on other precious metals such as platinum and palladium has been cut to 10 percent from 12.5 percent. All these products will, however, attract a 2.5 percent AIDC.

Besides, the Finance Minister has proposed deliveries and acceptance of Indian refined gold in all Bombay Stock Exchange (BSE) gold contracts. This is another boost for the domestic bullion sector.

The bullion industry’s reaction to the proposals was upbeat.