Govt. cuts gold duty drawback rate by 50% after import duty revision

The government has significantly reduced gold duty drawback rates from ₹704.1 to ₹335.50 per gram and for silver items from ₹8,949 to ₹4,468.10 per kilogram. This move comes just a month after the import duty on gold and silver was revised in Budget 2024.

Effective August 23, the new duty drawback rates for gold jewelry have been lowered from ₹704.1 per gram to ₹335.50 per gram for gold with a purity of .995 or higher. For silver jewelry and other silver items, the rate has been cut from ₹8,949 per kilogram to ₹4,468.10 per kilogram, ensuring consistent rates across all silver products.

Duty drawback rates are refunds provided to exporters to offset the customs duties paid on imported inputs. These rates are adjusted to align with changes in import duties on gold and silver as announced in the budget.

Budget 2024 announcement on gold duty

In Budget 2024, Finance Minister Nirmala Sitharaman proposed reducing the customs duty on gold and silver to 6% and on platinum to 6.4%. This move aimed to enhance domestic value addition in the gold and precious metal jewelry industry.

While the budget did not address the gold duty drawback rate at the time, it was anticipated that the lower import duties would benefit gold and silver importers by reducing the cost of raw materials. The revised duty drawback rates now rectify this potential disparity.

Impact on gold imports and smuggling

The sharp reduction in import duties on gold and silver is expected to curb gold smuggling and free up blocked funds. As gold is a primary raw material for the gems and jewelry industry, lower import duties can release funds that were previously tied up in imports.

Gold imports have witnessed a significant increase, rising from $33.6 billion in FY 2019 to $48.8 billion in FY 2024. Similarly, gold exports have grown from $6.59 billion in FY 2021 to $13.24 billion in FY 2024.

                    (By arrangement with livemint.com)