Shares of jewellery retailers fell after the government proposed to impose higher custom duty on importing gold and other precious metals. Government had raised import taxes on the metal to 10 per cent in a series of hikes to August 2013 as policymakers attempted to narrow a gaping current account deficit and arrest a decline in the rupee.

Niramal Sitharaman while presenting her first Budget for financial year 2019-20 proposed to increase import duty on gold and other precious metals to 12.5 per cent from 10 per cent. The hike in import duty of gold happened for the first time after 2013.

Shares of PC Jeweller fell 4.95 per cent to close at Rs 40.35 on the BSE. Titan Company which sells gold jewellery under the brand name Tanishq saw its shares fall fell 1 per cent to close at Rs 1,277.75 and shares of Tribhovandas Bhimji Zaveri dropped 3 per cent to end at Rs 43.05.

“This is a shocking move. We were expecting reduction in the custom duty,” Anantha Padmanabhan, chairman of All India Gem and Jewellery Domestic Council (GJC) told news agency Reuters, adding the hike has effectively raised smugglers’ margins.

Gold smuggling surged in India after the government raised the import duty to 10 per cent in August 2013, according to news agency Reuters. Grey market operators – businesses that smuggle gold from overseas and sell it in cash to avoid the duties – got a further boost in 2017 when India imposed a 3 per cent sales tax on bullion.

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