KOCHI: Consumers in Kerala, one of India’s largest markets for gold and silver jewellery, are expected to benefit significantly from the reduction in Basic Customs Duty on gold and silver from 10% to 5%, and the Agriculture Infrastructure & Development Cess (AIDC) from 5% to 1%.
Gold prices fell immediately post the Budget announcement, from Rs 72,850 per 10g to Rs 68,500. As per the estimates from the World Gold Council (WGC), Kerala likely has the highest per capita gold consumption in India, with an annual consumption of 200-225 tonnes.
Stakeholders said the move can lift retail demand and help cut smuggling. The government hopes the reduction will reduce input costs, deepen value addition, promote export competitiveness, correct inverted duty structures, and boost domestic manufacturing. Sachin Jain, WGC regional CEO, India, said reduction of duty on gold will boost overall competitiveness of the domestic jewellery industry.
“It will effectively reduce overall taxes on gold from around 18.5% (including GST) to 9%. It’s a massive step in right direction, as it will reduce the incentives for smuggling, and create a level playing field for honest stakeholders. Gold prices will also correct locally, giving a boost to retail gold demand,” he said. S Abdul Nassar, treasurer of All Kerala Gold and Silver Merchants Association, said the reduction had been a long-pending demand of the industry and would go a long way in formalising it.
“The move will help small jewellery traders and manufacturers, and lead to decline in smuggling and black money. The decision to increase the limit of Mudra loans from Rs 10 lakh to Rs 20 lakh and introduction of a new assessment model for MSME credit will also help in the robustness of the sector,” he said.
Ramesh Kalyanaraman, executive director, Kalyan Jewellers, said the cut in customs duties on gold, silver, and platinum, coupled with the government’s commitment to enhance domestic value addition and craftsmanship, are poised to significantly benefit the jewellery industry.