India’s gems & jewellery industry had been flying high in the skies right from the beginning when general elections were declared three months ago and up to 10th July when the budget was presented. It was banking much over the formation of the new government with the hope that the new (Narendra Modi) government would certainly prove to be a savior for the ailing industry.
But all ‘aspirational tyres’ of the industry were punctured by India’s new Finance Minister (FM) Mr. Arun Jaitley last week when he presented his government’s first budget wherein none of the major demands of the industry was accepted.
Some of the prime demands put forward by India’s trade organizations including the Gem & Jewellery Export Promotion Council (GJEPC) were to totally abolish or drastically reduce the gold import duty from present 10% to 5 or 6% and to review the 80:20 rule along with establishing a ‘Special Notified Zone’ (SNZ) under the department of customs for trading of rough diamonds on a consignment basis in India.
Various industry trade organizations had submitted a long list of demands to the FM as their pre budgetary recommendations, some of them have been pending and are being carried forward since many years. But what the FM did was only rationalization of the basic customs duty at 2.5% for all kinds of diamonds including semi-processed, half cut or broken diamonds, cut and polished diamonds and coloured gemstones.
Semi-processed, half cut or broken diamonds are exempted from basic customs duty in India at present, while cut and polished diamonds and coloured gemstones attract basic customs duty of 2%. Mr. Jaitley has also given extra weightage on promotion of exports by reviving the Special Economic Zones (SEZs) including the gem & jewellery SEZs in the country.
But the industry stalwarts are not happy with these proposals which they feel are not going to bear any major impact on the sector. Especially the jewellery sector is very disappointed as the gold import duty has not been reduced even by 2 or 3%. They are now warning again that gold smuggling would continue as the duty has not been reduced even slightly.
An official statement issued by the GJEPC said, “While announcing various small measures and state level schemes, the FM has maintained the populist front. However none of them promise any major impact on the gem & jewelry sector. The industry is pleased with the renewed focus on promotion of exports and reviving the SEZs in the country. The GJEPC will forward its recommendations for reviving the G & J SEZs and will submit the same to the concerned authority shortly. We also welcome the rationalization of the direct tax mechanism for quicker settlement of tax disputes.”
Chairman of All India Gems and Jewellery Trade Federation (GJF) Haresh Soni is quite upset with the provisions of the latest union budge. Express his anguish, he said, “We are very disappointed with Mr. Jaitley’s budget proposals as the finance ministry did not consider our repeated plea to reduce the gold import duty and also to abolish the stringent 80:20 rule which is the biggest impediment in smooth operations of imports. Reduction in customs duty might have eliminated smuggling and removed involvement of black money. Instead, the entire industry now feels let down by the government.”
Mr. Arun Jaitley is well aware of the plights of the industry but at this (early) stage, he feels helpless for India’s gem & jewellery industry. He says, “We have inherited a very weak economy from the previous government. Our government is committed to the economic reforms and growth but you (industries and the people) cannot expect a miracle within 45 days. We have begun a process to improve the economy and it may take some years.”
Posted by Suresh Chotai