Finance Minister Nirmala Sitharaman presented Budget 2021 on February 1 in the Parliament and announced that the government has decided to rationalise the custom duty on gold and silver in order to bring prices closer to previous levels. Gold and silver presently attract a basic customs duty of 12.5 per cent. Since the duty was raised from 10 per cent in July 2019, the prices of precious metals rose sharply. As part of Budget 2021, the base custom duty on gold and silver have been cut from 12.5 per cent to 7.5 per cent. Since the beginning of 2021, gold rates have been volatile after it hit a record high of Rs 56,196 per 10 grams in August last year.
On the Multi Commodity Exchange (MCX), gold futures were last seen trading trader 0.1 per cent higher to Rs 47,996.00, registering a volatile session throughput the day. Silver futures was last down by 0.96 per cent to Rs 69,030.00. Experts believe that the reduction in customs duty for gold and silver as part of Budget 2021, will result in cheaper prices for the precious metals.
Customs Duty on gold, silver slashed from 12.5 per cent to 7.5 per cent:
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”Government decided to cut the base customs duty on gold and silver from 12.5 per cent to 7.5 per cent and imposed a 2.5 per cent agriculture Infrastructure and development cess. The net implication comes around 10.75 per cent after considering the cess and applicable social welfare surcharge. Since MCX Gold and silver price is inclusive of customs duty, a cut in tax will reduce domestic price. We saw the gold price falling sharply in reaction to the duty cut,” said Ravindra Rao, VP-Head Commodity Research, Kotak Securities Limited.
”India is a major consumer of gold and silver and lower price may improve demand outlook boosting international prices. Going forward, Indian gold and silver prices have become cheaper due to lower taxes however this does not affect the price trend. Since India is largely a price taker, trend in the international market will remain a key price determining factor. Since we maintain a bullish view on COMEX gold and silver, we expect MCX Gold and silver also to trade with a positive bias,” he added.
”The reduced rate shall further decrease the gap between the Indian and international markets gold rate and shall discourage illegal smuggling. Basis the same this reduction in rate can lead towards the investment in gold to boost by the people. The people who intent to buy jewellery in the coming future can expect some reduced pricing,” said Agrah Garg, Director, SAJ Solitaire.