The gems and jewellery exporters have been demanding for the last several years to cut duties on precious metals to boost exports and manufacturing.
The government on Tuesday slashed customs duties on a range of products, including gold, silver, critical minerals, mobile phones, and other electronic items, to cut input costs, increase value addition, promote export competitiveness, and boost domestic manufacturing.
The duties were also reduced on shea nuts; marine sector goods like prawn and shrimp feed, and fish feed; inputs for the manufacture of these feeds like lipid oil; cancer drugs; other precious metals like silver and platinum; textile, steel, copper, capital goods, shipping, medical equipment, and leather sector items.
The basic customs duty (BCD) on coins of precious metals, gold/silver findings, and gold and silver bars was reduced to 6 per cent from 15 per cent. It was cut to 5.35 per cent from 14.35 per cent for gold and silver ore.
On platinum, palladium, osmium, ruthenium, and iridium, the levy was cut to 6.4 per cent from 15.4 per cent.
The gems and jewellery exporters have been demanding for the last several years to cut duties on precious metals to boost exports and manufacturing.
"My proposals for customs duties intend to support domestic manufacturing, deepen local value addition, promote export competitiveness, and simplify taxation while keeping the interest of the general public and consumers surmount," Finance Minister Nirmala Sitahraman said.
"To enhance domestic value addition in gold and precious metal jewellery in the country, I propose to reduce customs duties on gold and silver to 6 per cent and that on platinum to 6.4 per cent," she added.
The significant duty cuts on precious metals will help reduce smuggling, but cost the government an annual revenue loss of over Rs 28,000 crore based on 2023-24 import levels, think tank GTRI said.
In FY24, India imported gold worth USD 45.54 billion and silver worth USD 5.44 billion, while exporting jewellery worth USD 13.23 billion.
In volume terms, India normally imports 800-900 tonnes annually.
In 2022, India has raised its basic import duty on gold to 15 per cent from 10.75 per cent. India is the world's second-biggest consumer of the precious metal.
India fulfils most of its gold demand through imports and it put pressure on the rupee and current account deficit.
Seizure of smuggled gold rose to a record high of 3,917.52 kg in the January-October period, 2023, in 4,798 cases.
As per government data, 3,502.16 kg of smuggled gold was seized in the country in 2022, and 3,982 smuggling cases were detected.
In 2021, 2,383 kg of smuggled gold was seized and 2,445 cases detected while in 2020, 2,155 kg of smuggled gold was seized and 2,567 cases were detected.
The precious metal accounts for over 5 per cent of the country's total imports.
Switzerland is the largest source of gold imports, with about 40 per cent share, followed by the UAE (over 16 per cent) and South Africa (about 10 per cent).
The minister also proposed to undertake a comprehensive review of the rate structure over the next six months to rationalise and simplify it.
On mobile phones and parts, she said with a three-fold increase in domestic production and an almost 100-fold jump in exports of mobile phones over the last six years, the Indian mobile phone industry has matured.
"In the interest of consumers, I now propose to reduce the BCD on mobile phones, mobile PCBA and mobile chargers to 15 per cent," she said, adding that customs duties are fully exempted on 25 critical minerals.
This will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors, the minister said.
Critical minerals, such as cobalt, copper, lithium, nickel and rare earth, play a crucial role in the production of clean energy technologies from wind turbines to electric cars.
On the solar sector, the minister said the energy transition is critical in the fight against climate change.
"To support the energy transition, I propose to expand the list of exempted capital goods for use in the manufacture of solar cells and panels in the country. Further, in view of sufficient domestic manufacturing capacity of solar glass and tinned copper interconnect, I propose not to extend the exemption of customs duties provided to them," the minister noted.
To promote seafood exports, which have touched Rs 60,000 crore, a duty cut was proposed on certain broodstock, polychaete worms, shrimp, and fish feed to 5 per cent.
Similarly, to enhance the competitiveness of exports in the leather and textile sectors, the minister proposed to reduce BCD on real down-filling material from duck or goose.
On the electronics segment, Sitharaman said to increase value addition in the domestic electronics industry, the duty was removed on oxygen-free copper for resistor manufacturing.
"I also propose to exempt certain parts for manufacture of connectors," she said, adding that to incentivise domestic manufacturing, the duty is hiked from 10 to 15 per cent on printed circuit board assembly of specified telecom equipment.
Commenting on these decisions, EY Partner Saurabh Agarwal said the changes aim to boost domestic manufacturing in these sectors.
Nangia Andersen India Director Tanushree Roy said the move would lower administrative burdens, boost competitiveness for businesses, and attract foreign investment.
Gulzar Didwania, Partner, Deloitte India, added that the overall objective of the customs-related proposals is to review and rationalise customs duty over the next six months to encourage domestic value-addition, enhance export competitiveness, remove inverted duty structure, and reduce disputes with the authorities.