The Centre is unlikely to cut basic customs duty on gold in the upcoming Interim Budget, given concerns that it could limit revenues, despite a recommendation from stakeholders to lower the levy from the existing rate of 15 percent, according to a government official.
"If customs duty is reduced, smuggling is reduced but government revenue also goes down. Logic says customs duty should be low on gold, which is very high. But the Finance Ministry feels it is a high source of revenue," the official said.
In July 2022, the central government hiked import duty of gold. The basic customs duty on gold plus the agricultural infrastructure and development cess currently stands at 15 percent. The government did reduce the basic customs duty on import of the yellow metal to 10 percent percent from 12.5 percent earlier. But, the agriculture cess was hiked to five percent from 2.5 percent. As a result, the total duty on gold imports remains unchanged.
The Gem & Jewellery Export Promotion Council (GJEPC) recently sought a reduction in import duty on Gold Bar (7108) from 15 percent to 4 percent to clear duty blockage worth around Rs 982.16 crore, which could help create more working capital for the industry. GJEPC also recommended lowering of import duty on Silver Bars (7106) from 10 percent to 4 percent.
In December 2023, India's gold imports rose by a whopping 156.5 percent year-on-year to $3.03 billion, taking the total for the first nine months of 2023-24 to $35.95 billion – 26.6 percent more than the same period for 2022-23. At the same time, India’s gems and jewellery exports were up 14.1 percent year-on-year in the last month of 2023 at $2.90 billion, although they are down 16.2 percent at $24.31 billion so far in 2023-24, per latest data released by the Commerce Ministry on January 15.
In the 2023-24 budget, the import duties on silver and silver dore were increased to align them with the duty structure of gold. While, the basic customs duty on silver was raised to 10 percent from 7.5 percent along with a hike in agriculture infrastructure and development cess on imports to 5 percent from 2.5 percent earlier.
Finance Minister Nirmala Sitharaman will announce the Interim Budget for 2024-25 on February 1.
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