Massive Duty Cuts on Precious Metals to Curb Smuggling, Impact Revenue

The significant duty cuts on precious metals aim to reduce smuggling but will result in a revenue loss of over Rs 28,000 crore for the government. The reductions span various sectors, including electronics, critical minerals, and agriculture. Experts suggest the changes are strategic steps to bolster domestic industries and promote exports.

The substantial reductions in customs duties on precious metals, announced in the 2024 Budget, aim to curb smuggling but will lead to a significant revenue loss for the government. According to the Global Trade Research Initiative (GTRI), these cuts will result in an annual revenue deficit of over Rs 28,000 crore based on current import levels.

The duty cuts, which slashed rates from 15 per cent to 6 per cent for gold bars and similarly for other precious metals, reflect a strategic move. While the government has not explicitly stated its reasons, one probable cause could be addressing large quantities of bullion imported at concessional rates via the India-UAE Comprehensive Economic Partnership Agreement (CEPA).

In addition to precious metals, the Budget has introduced significant reductions in Basic Customs Duty (BCD) across various sectors, spanning electronics, critical minerals, marine, agriculture, chemicals, and textiles. GTRI Founder Ajay Srivastava highlighted that the zero-duty import framework on critical minerals could spur domestic processing and reduce dependency on China's dominant processing facilities. Although these reforms present lucrative opportunities, careful monitoring will ensure the intended economic benefits are fully realised.