UPDATE 2-India slashes import tax on gold, silver to tackle smuggling

(Adds trade official, premium update, share price, detail, from paragraph 3) By Rajendra Jadhav MUMBAI, July 23 (Reuters) - India slashed import duties on gold and silver on Tuesday in a move industry officials said could lift retail demand and help cut smuggling in the world's second-biggest bullion consumer. Higher demand for gold from India could boost global prices, which hit a record high this year, although that could widen India's trade deficit and put pressure on its ailing rupee. "It's a massive step in (the) right direction, as it will reduce the incentives for smuggling of gold. It will create a level playing field for honest industry stakeholders," said Sachin Jain, CEO of World Gold Council's Indian operations. The government said it will charge 5% basic customs duty and 1% in Agriculture Infrastructure & Development Cess (AIDC) on gold and silver imports, lowering import duties to 6% from 15%. "To enhance domestic value addition in gold and precious metal jewellery, I propose to reduce customs duties of gold and silver to 6%," India's Finance Minister Nirmala Sitharaman said in a budget speech. Local gold prices MAUc1 fell 6% to 68,500 rupees per 10 grams, their to their lowest level in more than three months after the announcement. Indian prices hit a record high of 74,777 rupees earlier this month, which squeezed demand. Overseas gold prices XAU= erased losses and rose 0.4%. Indian jewellery demand was hit by record-high gold prices, but the duty cut will bring down prices and boost consumption, said Saurabh Gadgil, chairman of PNG Jewellers. Gold was trading at a premium in India for the first time in eleven weeks on Tuesday, with dealers charging a premium of up to $20 an ounce over official domestic prices, inclusive of 15% import and 3% sales levies, versus last week's discount of $65. Shares of jewellery makers such as Titan Company TITN.NS , Tribhovandas Bhimji Zaveri TBZL.NS , Senco Gold SENC.NS and Kalyan Jewellers jumped by up to 10%. Finance Minister Sitharaman also announced an import duty exemption for 25 critical minerals, including lithium. India has been exploring ways to secure supplies of lithium, a critical raw material used to make electric vehicle batteries. (Reporting by Rajendra Jadhav; Additional reporting by Neha Arora; Editing by Himani Sarkar, Clarence Fernandez and Alexander Smith) (([email protected]; +91-22-68414378 ; Reuters Messaging: [email protected]))