In the Union Budget 2021, finance minister Nirmala Sitharaman reduced customs duty on gold and silver. Notably, custom duty on gold has been reduced to 7.5 per cent. While announcing this Sitharaman said, “Gold and silver presently attract a basic customs duty of 12.5%. Since the duty was raised from 10% in July 2019, prices of precious metals have risen sharply. To bring it closer to previous levels, we are rationalising customs duty on gold and silver.”
Sitharaman explained that the step was taken due to the increase in prices of the precious metals. According to experts, high customs duty on gold helps the government in reducing gold imports, which is good as it keeps trade deficit under check.
The move was expected as the latest Economic Survey which was tabled in Parliament on Friday also said that gold has emerged as a “safe-haven investment” in the backdrop of the pandemic-induced economic uncertainties, with prices increasing by 26.2% in November 2020 as compared to December 2019.
“From January 2020 onwards, gold prices have sharply increased with the sharp rise in the GEPU [Global Economic Policy Uncertainty]. In fact, compared to other assets, gold had returns during the year that were considerably higher,” the survey said.
Customs field formations across the country have reported large-scale smuggling of gold mainly because of lucrative margins. Therefore, reducing the margin by slashing the import duty on gold, is a step towards reducing the smuggling of gold as well.