Govt cuts customs duty on gold, silver, mobile phones

New Delhi: In a major policy shift aimed at enhancing domestic manufacturing and export competitiveness, the government announced significant reductions in customs duties on a broad spectrum of products on Tuesday. The move targets various sectors including precious metals, electronics, critical minerals, and seafood, among others.

Finance Minister Nirmala Sitharaman unveiled the new customs duty structure, which lowers the basic customs duty (BCD) on gold, silver, platinum, and other precious metals. The duty on coins of precious metals, gold/silver findings, and gold and silver bars has been reduced from 15 per cent to 6 per cent. Similarly, duties on gold and silver dore have been slashed from 14.35 per cent to 5.35 per cent, while the levy on platinum, palladium, osmium, ruthenium, and iridium has been cut from 15.4 per cent to 6.4 per cent.

This move is expected to address longstanding demands from the gems and jewellery sector for more favourable conditions to enhance exports and manufacturing.

However, after the announcement, gold prices tumbled by Rs 3,350 to Rs 72,300 per 10 grams in the local market amid subdued demand by jewellers. On Monday, the precious metal rates had closed at Rs 75,650 per 10 grams.

According to the All India Sarafa Association, silver prices also nosedived by Rs 3,500 or 4 per cent to Rs 87,500 per kg. In the previous session, it had closed at Rs 91,000 per kg.

In addition, gold of 99.5 per cent purity plummeted by Rs 3,350 to Rs 71,950 per 10 grams. It had settled at Rs 75,300 per 10 grams in the previous session.

Traders attributed the decline in gold prices after the government slashed customs duties on a range of products, including gold and silver, to cut input costs, increase value addition, promote export competitiveness and boost domestic manufacturing.

In a bid to support the domestic mobile phone industry, which has seen a three-fold increase in production and a dramatic rise in exports over the past six years, the duty on mobile phones, mobile PCBA (Printed Circuit Board Assembly), and mobile chargers has been reduced to 15 per cent. This is part of a broader strategy to bolster local value addition and simplify taxation.

The customs duties on critical minerals, essential for clean energy technologies and electric vehicle batteries, have been fully exempted.

These minerals include cobalt, copper, lithium, nickel, and rare earth elements. The exemption is expected to stimulate processing and refining activities, securing the availability of these strategic resources.

On the seafood front, the government has proposed a duty cut to 5% on certain inputs like shrimp and fish feed. This initiative aims to bolster the seafood export sector, which has achieved remarkable growth, touching Rs 60,000 crore.

In addition, the finance minister announced reduced duties on textile, steel, copper, and leather sector items. The BCD on real down-filling material from duck or goose and inputs for the manufacture of shrimp and fish feed has also been lowered.

Sitharaman emphasised that the new proposals are designed to foster domestic manufacturing, enhance local value addition, and promote export competitiveness. “My proposals for customs duties intend to support domestic manufacturing, deepen local value addition, and simplify taxation while keeping the interest of the general public and consumers paramount,” she said.

The government also plans to conduct a comprehensive review of the duty rate structure over the next six months to streamline and simplify it, aiming to eliminate duty inversion and reduce disputes.

For the solar sector, which is critical in the fight against climate change, the government has expanded the list of exempted capital goods used in the manufacture of solar cells and panels. However, the exemption for solar glass and tinned copper interconnect will not be extended due to sufficient domestic manufacturing capacity.

In the electronics segment, the duty on oxygen-free copper used in resistor manufacturing has been removed, and certain parts for connectors will be exempted from customs duties. Conversely, the duty on PCBA for specified telecom equipment has been increased from 10 per cent to 15 per cent to incentivize domestic production.