Mumbai: India’s Finance Minister (FM) Ms. Nirmala Sitharaman has proposed to hike the import duty on gold and other precious metals by 2.5% in Union Budget 2019. Prices for gold and other precious metals will go up with the latest announcement. Import of gold currently attracts a 10% customs duty.
“It is also proposed to increase custom duty on gold & other precious metals from 10% to 12.5%,” announced Ms. Sitharaman in her Budget speech today.
The proposal has attracted sharp reactions from all across the industry.
The Gem & Jewellery Export Promotion Council (GJEPC) has sought rollback and further reduction in import duty on Gold and precious metals, which has been increased to 12.5%. GJEPC has also sought a reduction in import duty on Cut & Polished Diamonds from 7.5% to 2.5% as part of the Government’s focus on enhancing exports and strengthening India’s positioning as a world leader in the diamond cutting and polishing business.
Mr. Pramod Kumar Agrawal, Chairman, GJEPC, said, “The gem & jewellery industry is going through very tough times with decline in exports and job losses and the industry expected some positive announcement as encouragement to our sector. GJEPC had represented for reduction in import duty for raw material inputs like gold, diamond and coloured gemstones to get some blocked capital released. Instead the increase of import duty on gold and silver and not decreasing the import duty on processed diamonds and gemstones will result in growth of business in neighbouring countries as the foreign tourists will stop buying jewellery from India, and processing of larger diamonds will shift to competing countries such as China and Vietnam. GJEPC will continue to work with the Government to get favourable relief for the sector in terms of duty and ease of doing business at transaction level.
GJEPC Chairman added that the first Union Budget presented by the first female Union FM of the Modi 2.0 Government continues the ‘Reform, Perform & Transform’ principles. “India’s Gem & Jewellery Industry desires a level playing field with other world centres to maintain its global leadership position. The cost of doing business has gone up. We seek reduction in high import duty on Precious Metals Gold/Silver/Platinum as it is encouraging grey market, hampering Export Competitiveness and resulting in job losses and has not helped in curbing CAD.”
GJEPC welcomes the proposal of business establishments with annual turnover of more than Rs. 50 crore to offer low cost digital modes of payment to their customers and no charges should be made applicable to the gem & jewellery sector.
GJEPC welcomes the Finance Minister’s proposal to apply the lower rate of 25% corporate tax to include all companies having annual turnover up to Rs. 400 crore.
GJEPC welcomes the Government’s initiatives of facilitating cluster based development to make the traditional industries more productive, profitable and capable for generating sustained employment opportunities. GJEPC has already set up Common Facility Center in Visnagar, Palanpur, Amreli, and Junagadh in Gujarat with a view to improve quality and production of diamonds. GJEPC has initiated a cluster mapping study through NCAER and based on its findings, dedicated CFCs will be setup at high potential target clusters to enable them to be competitive and internationally compliant to all standards and requirements related to manufacturing, processing, sourcing and product quality.
GJEPC recommends inclusion of gems & jewellery in focused sectors such as Bamboo, Honey and Khadi clusters. The SFURTI envisions setting up 100 new clusters during 2019-20 and this should enable 50,000 artisans to join the economic value chain. GJEPC urges Government to include gem & jewellery sector craftsmen and artisans in this initiative.
GJEPC welcomes the Government’s initiative to launch a Mission which will integrate our traditional artisans and their creative products with global markets. This is positive for the gem & jewellery industry.
GJEPC hopes that the Government’s initiative of creating world-class universities will also extend to gem & jewellery training and skill development institutes. It also hopes that the Pradhan Mantri Shram Yogi Maan Dhan Yojana pension scheme will benefit lakhs of workers in gem & jewellery businesses.
India’s Gem & Jewellery Industry, a world leader in Cut & Polished diamonds, is a USD 41 billion industry and contributes 7% to India’s GDP and 15% to Merchandise Exports; and employs workforce of 5 Million across India. Indian diamond industry alone provides livelihood to 1.5 million families and generates value addition in excess of US $ 7 billion.
All India Gem and Jewellery Domestic Council (GJC) has termed the proposed increase in import duty of gold from 10% to 12.5% as disappointing and unfortunate; adding that Gold will become more expensive in the country. GJC had sought immediate rollback and further reduction in Import Duty on Gold. GJC has said that this will have a negative impact on the indigenous Gem & Jewellery industry, which predominantly comprises handcrafted and labour intensive craftsmen. Over 55 lakhs skilled labour force engaged in manufacturing of jewellery in the domestic sector are likely to get negatively affected.
Mr. Anantha Padmanaban, Chairman, GJC, said, “The indigenous gems & jewellery businesses are disappointed with the first Union Budget of Hon. Prime Minister’s Modi 2.0 Government. This is not in tune with Make in India principles. The increase in customs duty for gold, which is our basic raw material, coupled with GST will make gold more expensive and encourage smuggling. Genuine and law-abiding businessmen will get affected! GJC had suggested to make the Gold Monetization Scheme (GMS) more effective and benefit the government and citizens at large but there is no mention of the same. The sharp hike and volatility in gold prices will further compound problems of jewellers.”
The 10% Import Duty on gold was levied to curb Current Account Deficit. However, India’s trade deficit narrowed to 2.5% of GDP n 2019. Reduction in the gold duty will directly reduce other social & economic menace in the country. 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.
Mr. Shaankar Sen, Vice Chairman, GJC, said “The Government has exempted start-ups receiving funds/ investment from scrutiny but the gems & jewellery sector businesses neither get funds or investments but are always under scrutiny. Jewellers fighting for survival will get tempted towards grey market dealings. On the positive side, GJC welcomes the Government’s initiative to launch a Mission which will help talented artisans to the world markets.”
Mr. Somasundaram PR, Managing Director, India, World Gold Council (WGC) said, “Import duty hike on gold from 10% to 12.5% will negatively impact India’s gold industry. This will impede efforts to make gold as an asset class particularly when gold prices are already rising globally. In addition, the grey market will thrive which will dilute efforts to reduce cash transactions.”
“Millions of Indians invest in gold as part of their household savings, not simply as discretionary spending for consumption. People buy gold as a long-term investment to protect their wealth and gold also has huge significance socially, emotionally and economically in India.”
“An increase in duty will be counterproductive to the objectives stated in the previous year’s budget and encapsulated in NITI Aayog’s recommendations for transforming the gold market. We believe that gold can play a positive role in the Indian economy, but to enable this; there needs to be a reduction in overall taxes, a stable policy environment and a transparent trading market.“
