In a significant move announced during Tuesday’s Budget presentation, Finance Minister Nirmala Sitharaman has revealed a substantial reduction in customs duties on gold and silver. The new measures are expected to impact market dynamics and consumer behavior.
The import duty on gold and silver has been slashed from 15% to 6%. This reduction includes a decrease in the Basic Customs Duty (BCD) from 10% to 5% and the Agricultural Infrastructure Development Cess (AIDC) from 5% to 1%.
Hareesh V, Head of Commodities at Geojit Financial Services, commented on the implications of this policy change: “The decrease in customs duty from 15% to 6% is likely to result in lower domestic prices and potentially increase demand. Previously, the total duty included a 10% BCD and a 5% AIDC.”
Following the announcement, gold prices on the Multi Commodity Exchange (MCX) saw a sharp decline, dropping to Rs 68,500 per 10 grams from Rs 72,838—a reduction of Rs 4,000. Similarly, international gold prices adjusted to around $2,397.13 per ounce.
Silver prices on the MCX also experienced a notable decrease, falling to Rs 84,275 per kg from Rs 88,995.
Sachin Kothari, Director at Augmont – Gold For All, described the customs duty cut as a significant boost for the bullion industry: “The reduction from 15% to 6% is a remarkable step. While a 5% cut was anticipated, the actual 9% reduction is impressive. This change enables consumers to purchase gold at lower prices, which may increase physical demand. MCX Gold prices have dropped from Rs 73,000 to Rs 69,000 and might further decrease to approximately Rs 67,000 per 10 grams.”
Mahendra Luniya, Chairman of Vighnaharta Gold Ltd, also emphasized the immediate effects of the duty reduction: “The market has been swiftly impacted by the duty cut. Although this is a positive development for investors, geopolitical factors such as actions by China may continue to influence gold prices. For consumers, the reduced prices present an advantageous opportunity for investment, particularly in digital forms like Sovereign Gold Bonds, which offer lower costs and an annual interest rate of 2.5%.”
Overall, the reduction in customs duties is anticipated to benefit both consumers and the bullion industry by stimulating market demand and increasing consumer spending, even as broader economic and geopolitical conditions continue to influence market trends.
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