2024-07-29 14:59:23
New Delhi: Gold prices have fallen sharply domestically after a massive cut in import duty on gold in the Union Budget. Gold prices in the futures market, which were above Rs 74,000 per ten grams earlier this week, fell to Rs 67,400 after the budget. This is its lowest level since the end of March. The fall in gold prices abroad made the situation worse. The government has cut custom duty on gold and silver by 6%. Basic customs duty has been reduced from 10% to 5%. Agricultural Infrastructure and Development Cess has been reduced from 5% to 1%. With this decision, the total tax on gold and silver in the country will effectively be reduced from 18.5% to 9%. This also includes GST. Stakeholders have been demanding a cut in gold and silver for a long time. The Government of India has been increasing custom duty for many years to curb gold imports. This is because it has a major role in increasing the current account deficit in the country. Reduction in custom duty will reduce input costs, reduce gold smuggling, boost domestic manufacturing and export competitiveness. India is the second largest consumer of gold in the world and most of its demand is met through imports. There has been a surge in gold imports through smuggling, which has caused revenue loss to the government.
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Data shows that gold smuggling to India was around 100 tonnes in 2022 and increased to 155 tonnes in 2023 due to a sharp rise in prices. However, a cut in custom duty will reduce the price difference between domestic and foreign gold which will reduce illegal imports. Gold prices have been skyrocketing in the last few years. Benchmark London spot gold and domestic prices have risen by more than 50% in the last two years. This was mainly due to rising geopolitical tensions, speculation of interest rate cuts in the US and gold buying by central banks. Middle East tensions and the Russia-Ukraine war added to the shine of gold.
Experts say that in the near term, the outlook for gold remains positive due to reasons such as rising geopolitical tensions, continuing uncertainties about US policy, increased purchases by central banks and weak global growth outlook. A reduction in custom duty in India may lead to an increase in gold consumption. This is likely to push its price up. Given the favorable demand prospects, long-term investors may take this as a buying opportunity to increase their holdings. On Friday, the last trading day of the week, gold saw a one percent rise in the global market.