gold silver metals
Union Finance Minister Nirmala Sitharaman has come up with proposals to cut duty on gold and silver imports, and also dore bars, besides others which will give a boost to the domestic bullion sector.
The bullion industry’s reaction to the proposals bordered on being euphoric to upbeat as they had been seeking a duty cut to take on the unorganised trade encouraged by gold smuggled into the country due to higher Customs duty.
Sitharaman has proposed a five percentage point cut in import duty on gold and silver. But the precious metals will attract a 2.5 percent Agriculture Infrastructure and Development Cess (AIDC) taking the total value of duty to a little over 10 percent.
“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, presenting the 2021-22 fiscal Budget 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 parts, particularly in southern India.
According to the World Gold Council, a body of gold-producing nations, India’s import of the yellow metal in 2020 dropped to 446.4 tonnes, the lowest in 25 years.
“Customs duty on gold and silver has been reduced and also a lot of relief in income tax assessment. Gold exchange regulator also appointed. Full marks for 2021 Budget,” said Prithviraj Kothari, Indian Bullion and Jewellers Association National President.
Ishu Datwani, Founder, ANMOL, said the reduction in duty will lead to a lower price for gold and it could discourage smuggling.
“The reduction of import duty, which is 5 percent on gold and silver, is a very positive step… It was not expected in this budget and hence, is a welcome surprise,” he said.
Snehal Choksey, Shobha Shringar Jewellers Director, also concurred with the view that it will reduce illegal trade in gold done with smuggled gold.
“It will be a major disincentive to smuggling,” said Tanya Rastogi, Lala Jugal Kishore Jewellers Director.
All of them welcomed the duty cut, saying it was growth-oriented.
“The entire industry has been waiting and hoping for a move like this and we are glad that the government considered our industry as we have been one of the worst-hit sectors during COVID19 period,” said Rastogi.
Fair businesses and organized trade is now expected to gain from this as till now, smuggled gold encourage unorganized and fly-by-night operators.
Though the AIDC cess would push up prices, the reduction is still seen as substantial by the sector.
Sitharaman 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.
The Budget document said it was a correction of “inverted duty structure”, which means duty on raw materials were higher than finished products.
Import duty on gold dore bars will be 6.9 percent now from 11.85 percent 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.
“It will encourage greater involvement by domestic market players and widen the array of acceptable gold for delivery of bullion,” said Sameer Patil, BSE Chief Business Officer.
(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)