Centre Raises Import Duty On Gold, Silver And Platinum To Curb Forex Outflow

AI Generated Image

On Wednesday, the Centre increased customs duties on gold and silver imports to 15 per cent from the earlier 6 per cent, in a bid to reduce pressure on India’s foreign exchange reserves and manage the country’s external account during the continuing West Asia tensions.

Import duty on platinum has also been revised upward, rising from 6.4 per cent to 15.4 per cent.

Under the new tax framework, imported gold and silver will attract a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess (AIDC), resulting in a total effective duty of 15 per cent.

Officials believe the higher duties could help limit imports of precious metals, which have significantly contributed to India’s rising import expenditure and foreign exchange outflows in recent months. The measure also aims to strengthen overall macroeconomic stability.

Earlier this month, Prime Minister Narendra Modi appealed to citizens to avoid unnecessary gold purchases for one year. He also urged people to follow austerity measures. The appeal aimed to help conserve foreign exchange reserves during the ongoing global uncertainty linked to the West Asia conflict.

India is among the world’s largest consumers of gold. Demand remains strong due to jewellery purchases, investment interest and festive buying.

Despite the increase in import costs, investor interest in gold-backed investment products remained strong in April.

The Association of Mutual Funds in India released fresh data on gold exchange-traded funds (ETFs). It showed that inflows into gold ETFs increased by 34 per cent in April. The figure rose to Rs 3,040 crore from Rs 2,265 crore recorded in March.

In contrast, silver ETFs continued to record investor withdrawals for the third straight month. AMFI figures showed silver ETFs witnessed an outflow of Rs 126 crore in April, after outflows of Rs 683 crore in March and Rs 826 crore in February.

Also Read: India Building For Rising Domestic Demand, Says Gautam Adani At CII Summit

Mankrit Kaur