India slashes import tax on gold, silver

India slashed import duties on gold and silver on Tuesday in a move industry officials said could lift retail demand and help cut smuggling in the world’s second-biggest bullion consumer.

Higher demand for gold from India could boost global prices, which hit a record high this year, although that could widen India’s trade deficit and put pressure on its ailing rupee.

“It’s a massive step in (the) right direction, as it will reduce the incentives for smuggling of gold. It will create a level playing field for honest industry stakeholders,” said Sachin Jain, CEO of World Gold Council’s Indian operations.

The government said it will charge 5% basic customs duty and 1% in Agriculture Infrastructure & Development Cess (AIDC) on gold and silver imports, lowering import duties to 6% from 15%.

“To enhance domestic value addition in gold and precious metal jewellery, I propose to reduce customs duties of gold and silver to 6%,” India’s Finance Minister Nirmala Sitharaman said in a budget speech.

Local gold prices fell 6% to 68,500 rupees per 10 grams, their lowest level in more than three months after the announcement. Indian prices hit a record high of 74,777 rupees earlier this month, which squeezed demand.