NEW DELHI: Gold prices plunged after the Finance Minister Nirmala Sitharaman proposed to cut import duty on gold while presenting the Union Budget 2021 on Monday. On the other hand, shares of jewellers surged.
Sithraman proposed to cut duty on gold and silver to 7.5 per cent from 12.5 per cent, meeting industry demand. However, she also proposed Agriculture infrastructure and development cess at the rate of 2.5%.
Gold futures pared morning gains and was trading at Rs 47,939 per 10 gram, down nearly Rs 1,800 from Monday’s high. It was down 2.83 per cent from the previous close.
Following the announcement, shares of companies involved in the trade of precious metals soared. Titan was up 5 per cent to Rs 1,491, while PC Jeweller and Vaibhav Global were up 6 and 7 per cent, respectively. Other jewellers and gemstone traders also rose in tandem.
The industry was demanding a reduction in import duty on gold and goods and services tax (GST) to 7 per cent in order to curb the large-scale gold smuggling in the country, boost gold trade, as well as to strengthen demand for gold jewelry.
Presently, gold attracts 12.5 per cent import duty, which was raised by 250 basis points in 2019. Besides, the government also levies three percent GST, and the total duty and GST implication works out at 15.5 percent.
The cut in import duty has been a long standing demand from the industry that believes the high taxes result in smuggling and tax evasion.
In the last one year, gold and silver prices have shot up significantly, thanks to safe haven buying by the investors. However, due to the pandemic, import of the yellow metal dropped significantly in 2020.