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Budget 2021: Customs Duty on Gold and Silver Slashed to 7.5%, MCX Gold Prices Drop

Representative image

Representative image

According to the Finance Minister Nirmala Sitharaman, the decision has been taken to bring the customs duty back to the previous levels.

The prices of gold and silver are going to decrease after the government announced cuts in customs duty on gold and silver on February 1. The precious yellow metal has a 12.5 percent customs duty currently which will be reduced to 7.5 percent after the cut. This will directly affect the prices of both the metals. The bulk of India’s gold and silver requirements are imported. The customs duty was raised in July 2019 to 12.5 percent from 10 percent. After this, there was a significant increase in the price of gold and silver. According to the Finance Minister Nirmala Sitharaman, the decision has been taken to bring the customs duty back to the previous levels.

According to the chairman of Malabar Gold & Diamonds, Ahammed MP, the decision of the government is in line with demands that have been raised by the gems and jewellery industry, reported Mint. Ahammed also said that higher import duty was adversely affecting the revenue of the government and was promoting illegal transactions. He believes this is a step in the right direction.

The gold futures went down to Rs 48,480 per 10 grams on the MCX. It has fallen by Rs 1,228 or 2.49 percent. However, in the global market, the price is at USD 1862.8 per ounce and has in fact increased by 0.80 percent.

Reportedly, the demand for gold in the country fell by 35 percent in 2020. In 2019, 690.4 tonnes of gold was used however in 2020, only 446.4 tonnes was used. Not just gold but the total jewellery demand also dropped from 544.6 tonnes to 315.9 tonnes.

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However, after the reduction in customs duty, it is expected that the demand for gold will go up. It will create a demand for the metal in the physical market and will also make the business viable for stakeholders.