Mumbai: All India Gem and Jewellery Domestic Council (GJC) has sought immediate rollback in import duty of gold – the basic raw material for the jewellery business – from 12.5% to 10% and immediate implementation of a comprehensive integrated Gold Policy to save the gem & jewellery business and the jobs of 55 lakh labour force engaged in the business and the livelihood of their dependents/ families. The Import Duty of 12.5% + GST of 3% has made gold jewellery costlier thereby negatively impacting consumer sentiment leading to postponement of purchase decisions. The lack of demand in the gem & jewellery has resulted in many craftsmen and artisans being out of work and shifting to other businesses, where they are getting employment. And there have been several reports of gem & jewellery sector workers committing suicide.
GJC’s recommendations have been echoed by the India Gold Policy Centre (IGPC) set up by IIM-A that comprehensive integrated Gold Policy will usher in key reforms such as the establishment of a Gold Board and the advent of Bullion Banks. IGPC said that Bullion Banking would enable banks to source locally, finance bullion and refining business, and finance refineries to import dore or unrefined gold. It would also allow them to hedge their positions on Indian exchanges, create gold-backed products that help reduce dollar outflows and export refined bullion. GJC has also urged the Government to immediately implement Gold Monetization Scheme (GMS) and make it more effective to benefit citizens at large. To unlock family gold reserves of up to 24,000 tonnes and help reduce CAD, GJC urged that Government must give exemptions to households for minimum 500 grams of gold deposited under Gold Monetary policy, being of ancestral nature, from being questioned by any tax department. GJC delegation will soon meet Union Finance Minister for rollback & its recommendations.
Mr. Anantha Padmanaban, Chairman, GJC, said, “The Government should rollback gold import duty till the time revised Gold Monetization is implemented as that is the only feasible substitute to reducing gold imports. Reduction in gold duty will directly reduce social & economic menace in the country. The 10% Import Duty on gold was levied to curb Current Account Deficit (CAD) but India’s fiscal deficit narrowed down in FY 2019. Recently, CII just mentioned domestic jewellery manufacturing as one amongst various items that should get a boost from the Government. On one hand, the Government talks about taking Indian craftsmanship to the world while on the other hand its policies are making our skilled artisans leave the business with all their learnings, experience and expertise. Such policies are not in sync with Make of India or Ease of Doing Business.”
Mr. Shaankar Sen, Vice Chairman, GJC, said, “The Government should implement Gold Policy immediately to liberalize and simplify Gold Monetization Schemes to recycle household gold for utilization. The borrowers of gold should ensure that gold depositors get good interest rates and the Government with help from RBI should facilitate the policy framework for this change. The Government should act as a facilitator/ custodian to encourage households & temples to deposit the idle gold lying in their possession by imposing limits.”
“We also request the government that in case jewellery sold is reinvested in new jewellery, the exemption from Capital Gain as per Section 54F of the Income Tax Act 1961 should be the extended to G&J Industry. This will help the industry to move towards organized and compliant business practices. In case of remaking of new jewellery from old jewellery or old gold, GST is applicable @18% on labour charges. Due to high rate of GST, the customers are reluctant to go for this option. The other option left with customer is to sell the old jewellery and buy new jewellery. However, as there is Capital Gains Tax involved, customers are hesitant for this option also,” added Mr. Sen.
IGPC stated in its 2018-19 annual report, “To develop robust bullion banking, amendments and clarifications in the Banking Regulation Act are required to enable banks to source locally, do inter-bank dealing, export bullion, transfer ounces to the counterparty international bullion bank, allow opening of unallocated accounts, trade in dematerialized gold, hedge in domestic and international exchanges and finance refiners who want to source dore.”
While many of these activities are allowed, it is equally important to create a clearing system, push through standardization of physical gold that is to be traded, and increase vaulting infrastructure, IGPC added. Once done, this will pave way for setting up online the gold spot exchange, for whose regulation the government is setting up a Gold Board or precious metals board.
