“It’s a massive step in (the) right direction, as it will reduce the incentives for smuggling of gold. It will create a level playing field for honest industry stakeholders,” said Sachin Jain, CEO of World Gold Council’s Indian operations.
The government said it will charge 5% basic customs duty and 1% in Agriculture Infrastructure & Development Cess (AIDC) on gold and silver imports, lowering import duties to 6% from 15%.
“To enhance domestic value addition in gold and precious metal jewellery, I propose to reduce customs duties of gold and silver to 6%,” India’s Finance Minister Nirmala Sitharaman said in a budget speech.
Local gold prices fell 6% to 68,500 rupees per 10 grams, their to their lowest level in more than three months after the announcement. Indian prices hit a record high of 74,777 rupees earlier this month, which squeezed demand.
Overseas gold prices erased losses and rose 0.4%.
Indian jewellery demand was hit by record-high gold prices, but the duty cut will bring down prices and boost consumption, said Saurabh Gadgil, chairman of PNG Jewellers.
Gold was trading at a premium in India for the first time in eleven weeks on Tuesday, with dealers charging a premium of up to $20 an ounce over official domestic prices, inclusive of 15% import and 3% sales levies, versus last week’s discount of $65.
Shares of jewellery makers such as Titan Company, Tribhovandas Bhimji Zaveri, Senco Gold and Kalyan Jewellers jumped by up to 10%.
Finance Minister Sitharaman also announced an import duty exemption for 25 critical minerals, including lithium. India has been exploring ways to secure supplies of lithium, a critical raw material used to make electric vehicle batteries.
(By Rajendra Jadhav and Neha Arora; Editing by Himani Sarkar, Clarence Fernandez and Alexander Smith)