Gold, silver prices surge after 15% hike in import duty; check today's rates
PTC Web Desk: The Centre has sharply increased import duty on gold and silver from 6% to 15%, triggering a massive rally in bullion prices on the Multi Commodity Exchange (MCX) on Tuesday.
Following the government’s latest notification, gold futures surged by nearly Rs 10,000, while silver prices jumped around Rs 18,000 in a single session. On MCX, 10 gram of gold touched Rs 1.63 lakh, while silver climbed to Rs 2.97 lakh per kg.
The move comes at a time when India is facing mounting pressure on its foreign exchange reserves amid escalating geopolitical tensions involving the United States and Iran. The government is aiming to curb non-essential imports and reduce dollar outflow by making gold imports significantly more expensive.
Under the revised structure, the government has imposed a 10% basic customs duty along with a 5% Agriculture Infrastructure and Development Cess (AIDC), taking the effective import tax to 15%. In the Union Budget 2024, the Centre had reduced the duty from 15% to 6% to support domestic demand and curb illegal trade.
However, industry experts now fear that the steep increase could once again fuel gold smuggling activities.
According to bullion market participants, the earlier reduction in import duty had helped bring down illegal inflows of gold. With prices already at elevated levels, the latest hike could hurt consumer demand and push unofficial channels back into operation.
India Bullion and Jewellers Association National Secretary Surendra Mehta said the government’s decision appears aimed at controlling the current account deficit. He added that higher prices may weaken buying sentiment in the domestic market.
The latest changes also follow recent modifications in IGST rules for bullion imports. Banks importing gold are now required to pay 3% IGST immediately upon import, unlike the earlier system where payment could be deferred through bonded warehouse facilities until the metal was sold.
The revised tax mechanism has reportedly locked up large amounts of working capital for banks, leading many lenders to temporarily halt fresh gold imports. As a result, India’s gold imports for April are estimated at just 15 tonne, among the lowest monthly levels recorded in nearly three decades outside the Covid period.
Economists believe the move could help narrow India’s trade deficit and provide some support to the rupee, which recently slipped to a record low against the US dollar.
Prime Minister Narendra Modi has also urged citizens on multiple occasions to avoid purchasing gold for at least a year in order to conserve foreign exchange reserves and reduce pressure on the economy.
- With inputs from agencies
