Budget 2024: FM Nirmala Sitharaman announces cut in custom duty on gold and silver to 6%

Finance Minister Nirmala Sitharaman, on July 23, announced a cut in custom duty on gold and silver to 6%. Additionally, the finance minister further informed the customs duty slash on platinum 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,” Finance Minister said during the announcement of the Union Budget 2024.

According to analysts, this move is likely to lead to a decline in domestic prices of gold and silver and push the demand for precious metals in the country.

“Customs duty on gold and silver has been reduced to 6% that may lead to a decline in domestic prices and perhaps lift demand. The existing duty on gold and silver is 15 percent which comprises 10% of basic custom duty and 5 percent as Agricultural Infrastructure Development cess,” said Hareesh V, Head of Commodities, Geojit Financial Services.

Increased demand for gold from India could bolster global prices, which reached a record high earlier this year. However, this could also widen India's trade deficit and put additional pressure on the struggling rupee.

The reduction in basic customs duty of gold, silver and platinum has been a long pending demand of the gems and jewellery industry.

“In the Budget, the Finance Minister announced a reduction on Basic Custom Duty on gold and silver from 10 percent to 6 percent. Adding 5 percent AIDC, which remains unchanged, the total import duty on gold and silver is reduced from 15 percent to 11 percent 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 to reduce the cost of production on 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.

Gold stocks surge post announcement

On Tuesday, shares of gold and jewelry retailers soared on Tuesday following Finance Minister Nirmala Sitharaman's announcement on custom duty reduction on precious metals.

On the BSE, Senco Gold's stock soared by 6.16 percent to ₹1,000.80 per share. Rajesh Exports saw a 5.49 percent increase to ₹313.90, and PC Jeweller jumped 5 percent to ₹74.16, hitting its upper circuit limit.

Additionally, Titan Company's shares rose by 3.66 percent to ₹3,371.65 per share. Tribhovandas Bhimji Zaveri climbed 2.79 percent to ₹140.20, and Kalyan Jewellers India gained 1.54 percent to reach ₹537.05 per share on the exchange.