February 2, 2021 2:17:23 am
Finance Minister Nirmala Sitharaman on Monday surprised the gold market by announcing the reduction of custom duty on gold from 12.5 per cent to 7.5 per cent in the Union Budget for FY22.
However, the government slapped a freshly introduced levy called the Agriculture Infrastructure and Development cess of 2.5 per cent. The net effect will be lesser than the 5 per cent reduction that the headline number suggests.
Analysts said that the immediate effect of this move will be that gold prices will decline to the extent of reduction of levies. “All those holding gold will see the value erode to that extent whereas all those who want to buy more will get it relatively cheaper to that extent,” said Chirag Mehta, senior fund manager—Alternative Investments, Quantum Mutual Fund.
“Still, this is a welcome move and will be appreciated by the industry as it will reduce price distortions, bringing domestic gold prices closer to international prices to the extent of reduction in levy,” Mehta said.
The move, he said, will enable more efficient functioning of the gold markets in India and discourage illegal gold imports of the precious metal.
The Finance Minister also set the ball rolling for the creation of the proposed spot gold exchange by announcing that the Finance Ministry will be notifying the Securities and Exchange Board of India (Sebi) as the regulator for gold exchanges.
A gold exchange is the need of the hour as many of the key market players are currently under served by the current market structure and thereby stand at a disadvantage, Mehta said.
The Finance Minister also announced a slew of measures for GIFT City. “The slew of tax incentives announced for GIFT IFSC in the Union Budget have once again reaffirmed the government’s commitment to develop GIFT IFSC as a global financial hub.
The tax announcement would help in attracting global players in the Fund business, aircraft leasing & financing business and offshore investment banking sector to set up their base in GIFT IFSC,” said Tapan Ray, MD & group CEO, GIFT City.
“The development of world-class fintech hub at GIFT City announced in today’s Budget will go a long way in promoting and developing fintech start-ups. GIFT City would provide a platform to fintech firms to expand globally.
“The fintech hub will facilitate research, innovation and development of new age skills in fintech which will help in creating new job opportunities and attract quality talent to GIFT City,” Ray said.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines