Key figures: India announced on June 5 2024 the withdrawal of the input‑tax‑credit (ITC) benefit for banks that finance imports of gold, silver and platinum. The ITC, previously worth up to 2 % of the import value, is being eliminated effective July 1 2024. The move is expected to raise the effective cost of importing these precious metals by roughly ₹1,500–₹2,000 per troy ounce of gold and similar proportional increases for silver and platinum.
Context
The tax benefit was introduced in 2022 to stimulate domestic demand for precious metals and support the banking sector’s financing of import‑related loans. By removing the credit, the government aims to broaden the tax base and curb luxury‑goods consumption amid rising fiscal pressures. India is the world’s second‑largest gold consumer, accounting for ~10 % of global demand, so any cost increase can dampen import volumes. The policy shift also aligns with broader GST rationalisation efforts.
Bottom Line
- Capital markets: Expect modest downside pressure on precious‑metal ETFs and related stocks (e.g., mining firms with exposure to Indian demand).
- Sentiment: The news is viewed as a short‑term headwind for gold and silver prices, especially in INR‑denominated markets, though global fundamentals remain unchanged.
- Assets: XAU/USD and XAG/USD may see a 0.3‑0.5 % dip in the near term; Indian‑listed miners could face a 1‑2 % earnings compression if import volumes fall. The impact on platinum is likely similar but less pronounced due to lower baseline volumes.