Prices of gold-silver jewellery items likely to go down as Union Budget cuts customs duty

The Union Budget 2024, announced on Tuesday, proposed a reduction in customs duties on gold and silver to 6 per cent and on platinum to 6.4 per cent. According to Finance Minister Nirmala Sitharaman, the move aims to enhance domestic value addition in gold and precious metal jewellery within the country.

Similarly, customs duties on various precious metals and related items have been reduced. The duty on gold bars has decreased from 15% to 6%, while the duty on gold dore has been reduced from 14.35% to 5.35%. The customs duty on silver bars has also been lowered from 15% to 6%, and on silver dore from 14.35% to 5.35%. The duty on platinum, palladium, osmium, ruthenium, and iridium has been cut from 15.4% to 6.4%. Coins made of precious metals now face a reduced duty of 6%, down from 15%. Similarly, the duty on gold and silver findings has decreased to 6% from 15%. The customs duty for platinum and palladium used in noble metal solutions, compounds, and catalytic converters has been lowered from 7.5% to 5%. Lastly, the duty on bushings made of platinum and rhodium alloy, when imported in exchange for worn-out or damaged bushings exported from India, has been reduced from 7.5% to 5%.

Relationship between customs duty and prices

Customs duty is a tax imposed on goods imported into a country. Its impact on the price of an item can be understood as follows:

Direct impact: When customs duty decreases, the immediate effect is a reduction in the cost of importing the item. This could potentially lower the price of the item if the reduction in duty is passed on to consumers.

Price transmission: Whether the final retail price decreases depends on several factors, including how much of the duty reduction is transferred to the consumer. Companies may choose to absorb some or all of the reduced duty costs to remain competitive, especially if market conditions or competition necessitate it.

Market conditions: In a competitive market, a decrease in customs duty is more likely to result in a decrease in consumer prices. However, if the market is less competitive or if companies face other cost pressures, the reduction in duty might not fully translate into lower prices for consumers. In summary, a decrease in customs duty can lead to a reduction in the price of an item, but the extent of this reduction depends on the pricing strategies of businesses and market conditions.