The central government in India announced its decision to increase import duty on gold and silver jewellery, a move that will result in higher costs of the ornaments for the consumers as most of the hike is expected to be passed to the buyers.

The government said that it will levy customs duty at the rate of 2% on the value instead of a flat rate of Rs 300 per 10 gram. On the other hand, Silver will attract 6% duty, instead of a specific duty of Rs 1,500 a kg earlier.

The changes in import duty norms will result in customs duty of Rs 550 per 10 gram for gold and Rs 3,163 for silver. The duties on the metals will increase if their prices rise in the international markets as the duties are linked to their value.

Leading jewellery makers have said that they will have to increase the prices of gold and silver ornaments by 1% to 3%. The new rate will allow the government too generate Rs 600 crore additional revenue.

Small investors and households are increasingly looking at gold as a safe bet for investing their savings amid continuing uncertainty in the global economy and weak performance by the domestic share markets.