New Delhi: The All India Gems and Jewellery Trade Federation (GJF) has asked the government to at least double the gap between the import duties on raw gold and finished product to protect domestic manufacturers stressed by various curbs on raw material sourcing from overseas.
In a meeting with the finance minister, senior executives of the association demanded the government lower the import duty on gold to 2% and ask RBI to scrap the 80:20 rule on imports of the precious metal.
At present, the government imposes a 10% import duty on gold and 15% on gold jewellery, with just a 5% gap between the two. Earlier this year, high premiums, often to the tune of 10% customs duty on gold, had raised the raw material costs for domestic jewellers, making jewellery imports 5-7% cheaper than local purchases and hurting domestic manufacturing.
To control the soaring current account deficit (CAD), the government had raised the import duty on the precious metal three times last year to 10% from 4% and the Reserve Bank of India (RBI) mandated that at least one-fifth of the imported gold be kept aside for re-exports, choking gold supplies.
Although RBI had last month allowed more entities to import gold, aimed at easing a supply crunch and driving down premiums, industry executives said until the 80:20 rule is scrapped, even exports won’t improve.
They argue that since CAD is under control now, the duty should be trimmed significantly. The country’s CAD dropped to $32.4 billion in 2013-14 compared with $88 billion a year ago, helped immensely by a 46% drop in gold imports. The association had also asked the finance minister to raise the limit of payment of cash to gold sellers to R2,00,000 from the current limit of R20,000. Currently, if a person sells jewellery in the market, they can get at best R20,000 in cash and the rest in cheque. The jewellers’ body said the limit was fixed in the 1990’s when gold prices were nearly one-tenth of the current level.
To improve manufacturing practices in gemstones, GJF this week launched a programme called “Labham” in Delhi and NCR. According to Manish Jain, the vice-chairman of GJF, such an effort also has an objective of “gradual transition of the industry from unorganised to the organised mode of business operations”.
